Capital goods winners study: Building technology

By Gareth Hayes and Christopher Hoyes

Performance

Performance in the segment in 2024 largely mirrored that of the wider capital goods industry, with significant headwinds from inflation, high interest rates and political uncertainty. More specifically, we observed that home builders traded down last year to lower-cost building products and materials, and reduced the size of new homes.

Trends & challenges

The recent increase in tariffs by the new administration in the US has many global supply chains looking to minimize their exposure to China, Mexico and Canada, and trying to pre-empt which other countries may be targeted. This is making supply-chain planning challenging. High interest rates are impacting the financing of new projects, while the possibility of increased enforcement around undocumented workers in the US threatens significant disruption and cost increases.

More positively, data centers, healthcare and education continue to be bright spots in the commercial building sector, and housing demand in the US remains high. The growing convergence of commercial and residential electrical domains due to the rise of data centers is also creating opportunities in energy management solutions.

CEO action plan

• Understand your exposure to tariffs, your competitors’ exposure to tariffs and optimize your supply chain and market strategy accordingly
• Understand how undocumented worker enforcement will impact your business
• Increase your focus on data centers
• Develop an energy management solution.