A Can't-Miss Guide to a Recession-Proof Construction Business

A Can't-Miss Guide to a Recession-Proof Construction Business

19
September 2022
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Is the U.S. in a recession?

A recession is typically defined by two back-to-back quarters of declining gross domestic product (GDP). After official figures released in July 2022 showed two-quarters of a shrinking economy, it certainly feels like we are.

According to the U.S. Bureau of Labor Statistics, inflation is currently at a 40-year high, reaching 9.1% in June. Soaring gas prices are affecting consumers, and the costs of goods are up everywhere, from the pump to the grocery stores.

The answer to the recession questions feels like a no-brainer to most of us. But experts don't always agree; the issue of "is it a recession or not" has been highly debated.

An impending recession can cause stress, uncertainty, and worry for builders, remodelers, and artisan contractors.

The pros at Hammr, a construction networking app that connects over 10,000 tradespeople who want to showcase their work and find projects and opportunities, created a guide for recession-proofing your construction business.

Get the Hammr Guide: How to Prepare for a Construction Recession

Top Takeaways from Hammr's Guide to a Construction Recession

This helpful guide is chock full of resources, including YouTube video content and podcast episodes from pros to help you ensure your construction business is recession-proof.

Here are our favorite takeaways:

5 Signals that a Recession is Imminent

Hammr outlined five signals that a construction recession is on its way, including:

  1. More visible For Sale signs in your neighborhood
  2. Increased sub-contractor availability
  3. Postponed projects
  4. Rate hikes from the Fed
  5. Drop in permit applications

Are Builders Over-Building?

One of the critical conversations is whether home builders are over-building or under-building, according to Hammr.

From a shelter perspective, the market is undersupplied by 1.7 million homes, but that's at regular sales prices and rents, which we definitely don't have right now.

With today's home prices and mortgage rates, there is no guarantee that fulfilling the supply for homes would result in home sales. In fact, it's more than likely that it wouldn't.

On another note, the oversupply in homes could be a saving grace during the recession this time around compared to the 2006 and 2008 recessions, where an undersupply in homes created huge problems.

A Surprising Recession Opportunity: Build-to-Rent

Hammr identified an interesting opportunity arising from a potential recession: build-to-rent communities.

According to Hammr, build-to-rent can be a huge game changer in a recession. With the housing market slowing down due to rising mortgage rates, build-to-rent offers home builders another avenue for revenue heading into a recession, as the rent forecast is still reporting bullish.

As of 2021, build-to-rent properties make up only 5% of properties, but they are currently on the rise. According to Real Estate Magazine, 50,000 build-to-rent homes were constructed from September 2019 to September 2020, compared to a 40-year average of 31,000 a year.

If fulfilling home sales will be a struggle in a challenging economy, build-to-rent offers construction companies opportunities to keep building and helps address housing shortages.

How to Navigate a Construction Industry Recession

Hammr's guide outlines a path forward through a recession in the construction industry, covering essentials such as:

  1. How to hire and retain top talent during a recession
  2. Ways to maintain good communication with vendors
  3. The benefits of mentors and business coaches
  4. Moving away from poor-fit clients and projects
  5. How to attract better quality clients
  6. Why you may want to shift away from subcontractors and towards in-house hiring
  7. Real ways to optimize cash flow
  8. How to prioritize spending
  9. Best ways to keep clients happy and returning
  10. The importance of community and connections

Get the Guide

Read the Hammr guide to prepare for a construction industry recession and you won’t have to worry about whether or not you’ll still have a business to run come 2023 and beyond.

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