A bruising presidential election and a tightening labor market are prompting reservations about future spending for nonresidential building, even as the construction industry’s performance has staved off most gloom-and-doom scenarios.
Total spending for nonresidential building was up nearly 11%, to $103.3 billion, in the first quarter. The Census Bureau estimated that the value of nonresidential building put in place rose 3.1% in April compared to April 2015, to an annualized $461.8 billion, spurred by robust building of hotels, offices, and entertainment/amusement centers.
TOP CONTRACTOR GIANTS
2015 GC Revenue ($)
1. Turner Construction Co. $10,566,643,175
2. Whiting-Turner Contracting Co. $5,530,003,229
3. Fluor Corp. $5,048,920,000
4. Skanska USA $4,887,571,264
5. Gilbane Building Co. $4,406,057,000
6. PCL Construction Enterprises $4,344,294,460
7. Balfour Beatty US $3,955,770,283
8. Structure Tone $3,865,600,000
9. AECOM $3,772,057,000
10. DPR Construction $3,085,975,000
TOP CM/PM GIANTS
2015 CM/PM Revenue ($)
1. Hill International $503,000,000
2. Jacobs $460,670,000
3. JLL $328,233,760
4. Hunter Roberts Construction Group $259,724,915
5. AECOM $256,933,000
6. Burns & McDonnell $255,390,861
7. WSP | Parsons Brinckerhoff $173,063,000
8. Turner Construction Co. $161,788,824
9. Sachse Construction $109,836,555
10. Cumming $96,538,000
CONSTRUCTION GIANTS SPONSORED BY:
“The construction sector is likely to be the economic tailwind” in the U.S., predicts Kermit Baker, PhD, Chief Economist with the American Institute of Architects.
Baker and chief economists Ken Simonson of the Associated General Contractors of America and Alex Carrick of CMD Construction Data expect nonresidential construction spending to increase 9–10% this year and 4–8% in 2017. More than one-third of AGC’s membership expects there will be more work to bid on this year than last year, particularly in the retail, warehouse, lodging, and office sectors.
The trio of economists raised a number of red flags about factors that could slow construction spending. “Market fundamentals remain positive, but are fading in most sectors,” said Baker.
Carrick and Simonson are less sanguine about spending for education-related projects, mainly because growth figures for 4- to 17-year-olds and 18- to 26-year-olds are either flat lining or receding.
Simonson noted that recent legislation passed by Congress extends tax credits and allows for more federal dollars to flow into construction. But the federal government is reducing its overall physical footprint, so it’s more likely to renovate existing buildings than build new.
Multifamily housing, which has been one of the construction industry’s high-powered turbines—it’s up 30% since 2009, according to Baker—is expected to taper off to a still-strong but normalized range of 410,000–440,000 units per year.
Simonson also pointed out that the U.S. population has been growing at less than 1% annually, and that several states have lost population. Immigration, which has pushed population growth over the past few decades, has lost traction. The factors could lead to less mobility and less demand for new construction.
HELLO!!! ARE THERE ANY CARPENTERS OUT THERE?
Another area of concern for contractors is finding the skilled labor they need to complete projects they bid for.
The country’s unemployment rate stood at 4.7% in May, and was down in 269 of 387 metros, according to Bureau of Labor Statistics estimates. Carrick noted that the labor participation rate (the labor force as a percentage of the working-age population) fell to 62.5% in Q1/2016, from 67% in 2001.
Citing a recent survey of 1,300 AGC-member companies, Simonson said that 79% are having difficulty finding hourly craft professionals, and 73% struggle to hire carpenters. More than half (56%) said they have raised their base pay for hourly workers; 29% provide incentives and bonuses.
None of the economists anticipates a recession rearing its head any time soon. “I think there’s too much negative talk about the economy,” said Carrick. What does worry him are the sluggish energy sector and economic slowdowns outside the U.S., specifically China.
As for the presidential race, AGC’s Simonson lamented that it might not make much difference who wins. “I expect continued gridlock,” he says. “Uncertainty will cause companies to hold back on major investments.”
More on the 2016 Construction Giants: BD+C's John Caulfield examines how Turner uses to design-build, P3, Lean practices, and engineering services.
RETURN TO THE GIANTS 300 LANDING PAGE
Related Stories
| Oct 5, 2012
2012 Reconstruction Award Bronze Winner: Pomeroy Senior Apartments, Chicago, Ill.
The entire interior of the building was renovated, from the first floor lobby and common areas, to the rooftop spaces. The number of living units was reduced from 120 to 104 to allow for more space per unit and comply with current accessibility requirements.
| Oct 5, 2012
2012 Reconstruction Award Bronze Winner: Walsh Group Training and Conference Center, Chicago, Ill.
With its Building Team partners—architect Solomon Cordwell Buenz, structural engineer CS Associates, and M/E engineer McGuire Engineers—Walsh Construction, acting as its own contractor, turned the former automobile showroom and paperboard package facility into a 93,000-sf showcase of sustainable design and construction.
| Oct 5, 2012
2012 Reconstruction Award Silver Winner: 220 Water Street, Brooklyn, N.Y.
The recent rehabilitation of 220 Water Street transforms it from a vacant manufacturing facility to a 134-unit luxury apartment building in Brooklyn’s DUMBO neighborhood.
| Oct 5, 2012
2012 Reconstruction Award Silver Winner: Residences at the John Marshall, Richmond, Va.
In April 2010, the Building Team of Rule Joy Trammell + Rubio, Stanley D. Lindsey & Associates, Leppard Johnson & Associates, and Choate Interior Construction restored the 16-story, 310,537-sf building into the Residences at the John Marshall, a new mixed-use facility offering apartments, street-level retail, a catering kitchen, and two restored ballrooms.
| Oct 4, 2012
2012 Reconstruction Awards Silver Winner: Allen Theatre at PlayhouseSquare, Cleveland, Ohio
The $30 million project resulted in three new theatres in the existing 81,500-sf space and a 44,000-sf contiguous addition: the Allen Theatre, the Second Stage, and the Helen Rosenfeld Lewis Bialosky Lab Theatre.
| Oct 4, 2012
2012 Reconstruction Awards Gold Winner: Wake Forest Biotech Place, Winston-Salem, N.C.
Reconstruction centered on Building 91.1, a historic (1937) five-story former machine shop, with its distinctive façade of glass blocks, many of which were damaged. The Building Team repointed, relocated, or replaced 65,869 glass blocks.
| Oct 4, 2012
2012 Reconstruction Awards Gold Winner: Rice Fergus Miller Office & Studio, Bremerton, Wash.
Rice Fergus Miller bought a vacant and derelict Sears Auto and converted the 30,000 gsf space into the most energy-efficient commercial building in the Pacific Northwest on a construction budget of around $100/sf.
| Oct 4, 2012
2012 Reconstruction Award Platinum Winner: Building 1500, Naval Air Station Pensacola Pensacola, Fla.
The Building Team, led by local firms Caldwell Associates Architects and Greenhut Construction, had to tackle several difficult problems to make the historic building meet current Defense Department standards having to do with anti-terrorism, force protection, blast-proofing, and progressive collapse.
| Oct 4, 2012
2012 Reconstruction Awards Platinum Winner: City Hall, New York, N.Y.
New York's City Hall last received a major renovation nearly a century ago. Four years ago, a Building Team led by construction manager Hill International took on the monumental task of restoring City Hall for another couple of hundred years of active service.
| Oct 4, 2012
BD+C's 29th Annual Reconstruction Awards
Presenting 11 projects that represent the best efforts of distinguished Building Teams in historic preservation, adaptive reuse, and renovation and addition projects.
