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
K-12 Schools | May 30, 2023
K-12 school sector trends for 2023
Budgeting and political pressures aside, the K-12 school building sector continues to evolve. Security remains a primary objective, as does offering students more varied career options.
Multifamily Housing | May 30, 2023
Boston’s new stretch code requires new multifamily structures to meet Passive House building requirements
Phius certifications are expected to become more common as states and cities boost green building standards. The City of Boston recently adopted Massachusetts’s so-called opt-in building code, a set of sustainability standards that goes beyond the standard state code.
Contractors | May 26, 2023
Enhanced use of data is crucial for improving construction job site safety
Executives with major construction companies say new digital tools are allowing them to use data more effectively to reduce serious safety incidents and improve job site safety.
Contractors | May 24, 2023
The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of April 2023
Contractor backlogs climbed slightly in April, from a seven-month low the previous month, according to Associated Builders and Contractors.
Mass Timber | May 23, 2023
Luxury farm resort uses CLT framing and geothermal system to boost sustainability
Construction was recently completed on a 325-acre luxury farm resort in Franklin, Tenn., that is dedicated to agricultural innovation and sustainable, productive land use. With sustainability a key goal, The Inn and Spa at Southall was built with cross-laminated and heavy timber, and a geothermal variant refrigerant flow (VRF) heating and cooling system.
Architects | May 23, 2023
DEI initiatives at KAI Enterprises, with Michael Kennedy, Jr. and Gyasi Haynes
Michael Kennedy, Jr. and Gyasi Haynes of KAI Enterprises, St. Louis, describe their firm's effort to create a culture of diversity, equity, and inclusion—and how their own experiences as black men in the design and construction industry shaped that initiative.
Multifamily Housing | May 23, 2023
One out of three office buildings in largest U.S. cities are suitable for residential conversion
Roughly one in three office buildings in the largest U.S. cities are well suited to be converted to multifamily residential properties, according to a study by global real estate firm Avison Young. Some 6,206 buildings across 10 U.S. cities present viable opportunities for conversion to residential use.
K-12 Schools | May 22, 2023
The revival of single-building K-12 schools
Schools that combine grades PK through 12 are suddenly not so uncommon. Education sector experts explain why.
Healthcare Facilities | May 19, 2023
A new behavioral health facility in California targets net zero energy
Shortly before Mental Health Awareness Month in May, development and construction firm Skanska announced the topping out of California’s first behavioral health facility—and the largest in the nation—to target net zero energy. Located in Redwood City, San Mateo County, Calif., the 77,610-sf Cordilleras Health System Replacement Project is slated for completion in late 2024.
Government Buildings | May 18, 2023
GSA launches first biennial construction award program
Today, the U.S. General Services Administration (GSA) announced the new biennial GSA Construction Award program, which is seeking submissions this summer. The program was created to honor outstanding achievements in construction, with a focus on quality and craftsmanship, collaboration and team dynamics, sustainability, innovation, and technology. The first Construction Awards ceremony will take place in 2024.
