Real Estate
The real estate industry is closely aligned with residential and commercial real estate market fluctuations. Industry revenue correlates directly with property prices and real estate transaction volumes because pay is commission-based. The residential market represents more than two-thirds of industry revenue, making the industry especially sensitive to housing prices and existing home sales.
Increasing disposable income and low-interest rates have helped increase home affordability and bolstered demand. Additionally, rising house prices lead the way for steady gains in industry revenue. However, anticipated gains in employment will force the Federal Reserve to raise interest rates over the next few years. Higher interest rates will increase borrowing costs and reduce demand for homeownership. Both factors have the potential to limit industry growth in the coming years.
Construction
The construction industry has strongly rebounded over recent years. Tight credit markets, lower consumer spending, and high unemployment slowed growth until recently, as demand for new commercial and residential space has been intense.
Commercial construction typically lags behind the overall economy by one to two years due to the length of contracts. As economic activity has increased, contractors’ backlogs have filled, and demand for new construction has increased. As a result, many construction outfits can now raise prices, slowly leading to increasing profit margins.
Road and highway construction is also expected to increase due to the need to repair, expand, and rebuild existing infrastructure. Together with growing congestion caused by urban sprawl, these factors will force authorities to spend. Demand is expected to remain strong over the coming years in all areas due to decreasing office vacancy rates, increased infrastructure spending, and more fantastic new home starts.
Manufacturing
The manufacturing industry comprises a variety of participants – ranging from large, multinational corporations to local, family-owned businesses. Furthermore, these companies make everything from small specialty parts to household appliances and large construction equipment. As a result, the manufacturing industry is highly dependent on the health of other industries – especially construction and housing.
In recent years, the manufacturing industry has been faced with increased international competition and the lingering effects of the recession. International competition comes primarily from low-wage countries with little employment and environmental regulation. This enables competitors to manufacture products at significantly lower costs. In response, many domestic companies have offshore production. The future trend, however, is expected to include substantial repatriation of manufacturing due to consumer frustration with the low quality of foreign products. On the domestic side, upgrades in infrastructure and a continued housing recovery are anticipated to lead to greater demand.
Healthcare
The healthcare industry comprises many players, but is driven by primary care doctors and hospitals. The aging population has increased demand for healthcare services in recent years, with no expectation of this trend easing.
Chronic illnesses are disproportionately prevalent in older adults and are rising significantly due to demographic shifts. Additionally, the passage of the Patient Protection and Affordable Care Act now requires all individuals to obtain healthcare coverage. As a result of rising coverage, demand for primary care has grown substantially. But despite this growth, the number of primary care doctors has not expanded enough to keep pace with demand.
The hospital segment is consolidating, and organizations are seeking the most skilled and specialized healthcare professionals. Consequently, labor costs in this industry are high, and hospitals are increasingly facing nurse and physician shortages. Home healthcare and remote diagnosis of routine minor illnesses are becoming more common.
Technology
The technology industry has grown dynamically as businesses and consumers buy more software, computers, and mobile devices. Additionally, a side effect of web-based solutions and mobile devices has been an explosion of sensitive, private data requiring complex security software products.
The near term is expected to center on software increasingly entering day-to-day activities and the rise of big data, predictive analytics, and artificial intelligence. Phones and mobile computing devices provide new platforms for software publishers to compete. Additionally, the rapid move toward cloud computing opens various software possibilities as phones and tablets are no longer limited by low storage capacity. Finally, demand for security software to protect data is expected to rise considerably as new technologies continue to enter everyday life more and more.
Retail
The retail market comprises two primary segments: small specialty retailers and more extensive, big box stores. The retail industry is highly fragmented as it contains an array of products. As a result, the industry is driven primarily by macroeconomic trends.
Over the past several years, warehouse clubs and online retailers have taken market shares by providing one-stop shopping and lower prices. This competition has forced out underperformers but has not reduced the number of small shops. This is because there is significant freedom of entry and exit due to the industry’s low capital and other entry requirements.
Going into the future, the biggest threat to brick-and-mortar stores will come from online retailers. To survive, smaller shops will have to get into the online game themselves and improve their efficiency and value proposition. Consequently, surviving retailers are expected to realize higher profit margins and have a bright future.
Travel
Travel agencies are growing once again. Traditional operations are reinventing themselves to remain relevant in an industry now dominated by online travel websites like Expedia and Priceline. Consumers can now research locations, compare prices, book travel, and manage reservations without an expert’s assistance, negating traditional travel agencies’ role. Consequently, many travel agencies have been forced to find new markets and niches, such as serving the corporate sector or luxury travelers.
International trips, especially those to exotic locations, generally involve more complicated arrangements that require the services of professional travel agents. The traditional industry has also benefited from increased travel to emerging economies, as consumers are more inclined to have their plans organized by a professional when there is uncertainty surrounding their destination. Consumers who remain price-conscious and comfortable making their travel arrangements online will continue to present a significant challenge to the industry’s thousands of traditional travel agencies.
