Two related megatrends are driving demand and change in this sector – exponential population growth and rising urbanization. They are influencing where people live and work, and ultimately shaping the infrastructure needed to support these demographic changes. The engineering and construction industry is consolidating, and it may eventually evolve into a handful of huge firms that can drive economies of scale through standardization of design and construction. Firms that can incorporate digital data and machine learning are likely to achieve gains in market share and see higher margins.
Company specific thoughts:
WSP Global seems well-positioned to drive consolidation. It has expanded in major urban centers worldwide, and is focusing on high-profile transportation projects and specialty buildings. SNC-Lavalin is in a strong position thanks to its expertise in clean power and has been enhancing digital asset management. Finnings is leading Caterpillar equipment dealers with its digital and omnichannel offerings, and a team of in-house data scientists is developing value-added services. Aecon Group offers sub-contracting construction services that could potentially be displaced by other companies or more innovative construction methods. Stantec should see steady demand in its water, resource, and environmental segments. There is a question mark against Waste Connections, because it may suffer if there are regulatory changes or developments in packaging decomposition.
Industrials: Up close
The future will be determined by those who are willing to reinvest, adapt and turn future threats into opportunities.