Gilbane has released its Spring 2014 edition of the periodic report "Construction Economics: Market Conditions in Construction" (download the full report).
Among the findings from the Executive Summary:
CONSTRUCTION GROWTH IS LOOKING UP
- Construction Spending for 2014 will finish the year 6.6% higher than 2013. Nonresidential buildings will contribute substantially to the growth.
- The Architecture Billings Index (ABI) in 2013 dropped below 50 in April, November and December briefly, indicating declining workload. Overall the ABI portrays a good leading indicator for future new construction work.
- Selling price data for 2013 shows contractors adding to their margins.
- Construction jobs grew by 156,000 in 2013, less than anticipated. However, hours worked also grew by 3%, the equivalent of another 150,000+ jobs.
SOME ECONOMIC FACTORS ARE STILL NEGATIVE
- We are experiencing a slight slowdown in construction spending that could last through May, influenced by a slight dip in nonresidential buildings and a brief flattening in residential, but more so by a steep decline in nonbuilding infrastructure spending. The monthly rate of spending for nonbuilding infrastructure may decline by 10% through Q3 2014.
- The construction workforce and hours worked is still 22% below the 2006 peak. At peak average growth rates, it will take a minimum of five more years to return to previous peak levels.
- Construction volume is 23% below peak inflation adjusted spending, which was almost constant from 2000 through 2006. At average peak growth rates of 8% per year, and factoring out inflation to get real volume growth, it will take eight more years to regain previous peak volume levels.
- As workload expands in the next few years, a shortage of available skilled workers may have a detrimental effect on cost, productivity and the ability to readily increase construction volume.
THE EFFECTS OF GROWTH
- Construction spending during the first five months of 2013 declined from the rate of spending in Q4 2012. Growth has been inconsistent, even in the booming residential sector, which has seen recent declines. We see more consistent growth in 2014 for buildings.
- As spending continues to increase, contractors gain more ability to pass along costs and increase margins. The growth in contractor margins slowed since last year. However, expected increases in volume should reverse that in 2014.
- ENR’s Third Quarter 2013 Cost Report shows general purpose and material cost indices increased on average about 2% to 2.5% year over year. However, selling price indices increased 4% on average. The difference between these indices is increased margins.
IMPACT OF RECENT EVENTS
- There are several reasons why spending is not rapidly increasing: public sector construction remains depressed as sequestration continues; the government is spending less on schools and infrastructure; lenders are just beginning to loosen lending criteria; consumers are still cautious about increasing debt load, including the consumers’ share of public debt and we may be constrained by a skilled labor shortage.
- Supported by overall positive growth trends for year 2014, Gilbane expects margins and overall escalation to climb more rapidly than we have seen in six years.
- Growth in nonresidential buildings and residential construction in 2014 will lead to more significant labor demand, resulting in labor shortages and productivity losses. Margins regained a positive footing in 2012 and extended those gains in 2013. Expect margins to grow stronger in 2014. When activity picks up in all sectors, escalation will begin to advance rapidly.
Click here to download the complete report and a list of data sources.
ABOUT THIS REPORT
Gilbane Inc. is a full service construction and real estate development company, composed of Gilbane Building Company and Gilbane Development Company. The company (www.gilbaneco.com) is one of the nation’s largest construction and program managers providing a full slate of facilities related services for clients in education, healthcare, life sciences, mission critical, corporate, sports and recreation, criminal justice, public and aviation markets. Gilbane has more than 50 offices worldwide, with its corporate office located in Providence, Rhode Island. The information in this report is not specific to any one region.
Related Stories
Giants 400 | Feb 5, 2024
Top 30 Entertainment Center, Cineplex, and Theme Park Architecture Firms for 2023
Gensler, JLL, Nelson Worldwide, AO, and Stantec top BD+C's ranking of the nation's largest entertainment center, cineplex, and theme park architecture and architecture engineering (AE) firms for 2023, as reported in the 2023 Giants 400 Report.
Urban Planning | Feb 5, 2024
Lessons learned from 70 years of building cities
As Sasaki looks back on 70 years of practice, we’re also looking to the future of cities. While we can’t predict what will be, we do know the needs of cities are as diverse as their scale, climate, economy, governance, and culture.
Giants 400 | Feb 5, 2024
Top 90 Shopping Mall, Big Box Store, and Strip Center Architecture Firms for 2023
Gensler, Arcadis North America, Core States Group, WD Partners, and MBH Architects top BD+C's ranking of the nation's largest shopping mall, big box store, and strip center architecture and architecture engineering (AE) firms for 2023, as reported in the 2023 Giants 400 Report.
Laboratories | Feb 5, 2024
DOE selects design-build team for laboratory focused on clean energy innovation
JE Dunn Construction and SmithGroup will construct the 127,000-sf Energy Materials and Processing at Scale (EMAPS) clean energy laboratory in Colorado to create a direct path from lab-scale innovations to pilot-scale production.
Architects | Feb 2, 2024
SRG Partnership joins CannonDesign to form 1,300-person design giant across 18 offices
SRG Partnership, a dynamic architecture, interiors and planning firm with studios in Portland, Oregon, and Seattle, Washington, has joined CannonDesign. This merger represents not only a fusion of businesses but a powerhouse union of two firms committed to making a profound difference through design.
Giants 400 | Feb 1, 2024
Top 90 Restaurant Architecture Firms for 2023
Chipman Design Architecture, WD Partners, Greenberg Farrow, GPD Group, and Core States Group top BD+C's ranking of the nation's largest restaurant architecture and architecture engineering (AE) firms for 2023, as reported in the 2023 Giants 400 Report.
Standards | Feb 1, 2024
Prioritizing water quality with the WELL Building Standard
In this edition of Building WELLness, DC WELL Accredited Professionals Hannah Arthur and Alex Kircher highlight an important item of the WELL Building Standard: water.
Luxury Residential | Feb 1, 2024
Luxury 16-story condominium building opens in Chicago
The Chicago office of architecture firm Lamar Johnson Collaborative (LJC) yesterday announced the completion of Embry, a 58-unit luxury condominium building at 21 N. May St. in Chicago’s West Loop.
Industry Research | Jan 31, 2024
ASID identifies 11 design trends coming in 2024
The Trends Outlook Report by the American Society of Interior Designers (ASID) is the first of a three-part outlook series on interior design. This design trends report demonstrates the importance of connection and authenticity.
Museums | Jan 30, 2024
Meier Partners' South Korean museum seeks to create a harmonious relationship between art and nature
For the design of the newly completed Sorol Art Museum in Gangneung, South Korea, Meier Partners drew from Korean Confucianism to achieve a simplicity of form, material, and composition and a harmonious relationship with nature. The museum is scheduled to open on February 14. It is the firm’s first completed project since restructuring as Meier Partners.
