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
| Nov 12, 2014
Collaboration as competitive advantage
A collaborative planning and design process may seem like a common-sense goal, but the concept can be a challenge to achieve in the fragmented AEC industry. SPONSORED BLOG
Sponsored | | Nov 12, 2014
Williams Scotsman plugs into the jobsite
Many of our customers conduct important business from their temporary modular jobsite office and most require access to technology to get their job done effectively and efficiently. SPONSORED CONTENT
| Nov 12, 2014
Chesapeake Bay Foundation completes uber-green Brock Environmental Center, targets Living Building certification
More than a decade after opening its groundbreaking Philip Merrill Environmental Center, the group is back at it with a structure designed to be net-zero water, net-zero energy, and net-zero waste.
| Nov 12, 2014
Refocusing the shifted line
A recent trend in the practice of architecture that I’ve been noticing is the blurring of responsibility between design and construction coordination. I’m not sure why this trend began, but the subject is worth exploring, writes FXFOWLE's Mark Nusbaum.
| Nov 12, 2014
Designs by three finalists for new Beethoven concert hall unveiled
David Chipperfield and Valentiny are among the finalists for a new concert hall being built to commemorate Beethoven’s 250th birthday in his hometown of Bonn, Germany.
| Nov 12, 2014
Forbes: Houston is America's #1 construction hotspot
A new list of America's 20 biggest boomtowns shows Houston on top, with New York City close behind, followed by Dallas, Washington, D.C., and Los Angeles.
| Nov 11, 2014
Must see: Artist pairs up Hollywood icons with famous modern architecture
In his latest series, Federico Babina illustrated 17 iconic Hollywood personalities, from Marilyn Monroe to Michael Caine, interacting with famous 20th century homes.
| Nov 11, 2014
Renzo Piano's third building at London Bridge Quarter approved, will be built adjacent to the Shard
Renzo Piano Building Workshop has been granted planning approval for its residential building at London Bridge Quarter—a 26-story apartment tower dubbed Feilden House.
| Nov 10, 2014
5 guiding principles for solving airflow issues in open-plenum office spaces
Although architecturally appealing, exposed ceilings can create unwanted drafts and airflow problems if not engineered correctly. McGuire Engineers' Bill Stangeland offers tips for avoiding airflow issues on these projects.
| Nov 10, 2014
Clemson, Parsons architecture education programs honored for innovation, long-term impact
The architecture programs at Parsons The New School for Design and Clemson University have been selected as 2014 NCARB Award recipients for developing innovative curricula that merge practice and education.