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
K-12 Schools | Aug 29, 2024
Designing for dyslexia: How architecture can address neurodiversity in K-12 schools
Architects play a critical role in designing school environments that support students with learning differences, particularly dyslexia, by enhancing social and emotional competence and physical comfort. Effective design principles not only benefit students with dyslexia but also improve the learning experience for all students and faculty. This article explores how key design strategies at the campus, classroom, and individual levels can foster confidence, comfort, and resilience, thereby optimizing educational outcomes for students with dyslexia and other learning differences.
Museums | Aug 29, 2024
Bjarke Ingels' Suzhou Museum of Contemporary Art conceived as village of 12 pavilions
The 60,000-sm Suzhou Museum of Contemporary Art in Suzhou, Jiangsu, China recently topped out. Designed by Bjarke Ingels Group (BIG), the museum is conceived as a village of 12 pavilions, offering a modern interpretation of the elements that have defined the city’s urbanism, architecture, and landscape for centuries.
Adaptive Reuse | Aug 28, 2024
Cities in Washington State will offer tax breaks for office-to-residential conversions
A law passed earlier this year by the Washington State Legislature allows developers to defer sales and use taxes if they convert existing structures, including office buildings, into affordable housing.
Industrial Facilities | Aug 28, 2024
UK-based tire company plans to build the first carbon-neutral tire factory in the U.S.
ENSO, a U.K.-based company that makes tires for electric vehicles, has announced plans to build the first carbon-neutral tire factory in the U.S. The $500 million ENSO technology campus will be powered entirely by renewable energy. The first-of-its-kind tire factory aims to be carbon neutral without purchased offsets, using carbon-neutral raw materials and building materials.
Architects | Aug 28, 2024
KTGY acquires residential high-rise specialist GDA Architects
KTGY, an award-winning design firm focused on architecture, interior design, branded environments and urban design, announced that it has acquired GDA Architects, a Dallas-based architectural firm specializing in high rise residential, hospitality and industrial design.
K-12 Schools | Aug 26, 2024
Windows in K-12 classrooms provide opportunities, not distractions
On a knee-jerk level, a window seems like a built-in distraction, guaranteed to promote wandering minds in any classroom or workspace. Yet, a steady stream of studies has found the opposite to be true.
Building Technology | Aug 23, 2024
Top-down construction: Streamlining the building process | BD+C
Learn why top-down construction is becoming popular again for urban projects and how it can benefit your construction process in this comprehensive blog.
Airports | Aug 22, 2024
Portland opens $2 billion mass timber expansion and renovation to its international airport
This month, the Portland International Airport (PDX) main terminal expansion opened to passengers. Designed by ZGF for the Port of Portland, the 1 million-sf project doubles the capacity of PDX and enables the airport to welcome 35 million passengers per year by 2045.
Adaptive Reuse | Aug 22, 2024
6 key fire and life safety considerations for office-to-residential conversions
Office-to-residential conversions may be fraught with fire and life safety challenges, from egress requirements to fire protection system gaps. Here are six important considerations to consider.
Resiliency | Aug 22, 2024
Austin area evacuation center will double as events venue
A new 45,000 sf FEMA-operated evacuation shelter in the Greater Austin metropolitan area will begin construction this fall. The center will be available to house people in the event of a disaster such as a major hurricane and double as an events venue when not needed for emergency shelter.
