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
| Jul 8, 2013
RSMeans cost comparisons: offices, daycare centers, convenience stores, fast food
Construction market analysts from RSMeans offer construction costs per square foot for offices, daycare centers, convenience stores, fast food.
| Jul 8, 2013
RSMeans cost comparisons: hotels, motels, and apartment buildings
Construction market analysts from RSMeans offer construction costs per square foot for hotels, motels, and apartment buildings.
| Jul 8, 2013
Learn from the world’s fastest animal: speed isn’t everything
Every schoolchild knows that the cheetah is the world’s fastest land animal—70 mph, no sweat. And, as we all know from National Geographic television documentaries, it is speed that makes Acinonyx jubatus such a fearsome hunter, right?
| Jul 3, 2013
Mid-year special: Top 13 stories for 2013 (so far)
Every six months, we like to take a look back at the stories that generated the most interest from our readers. Here's a roundup of the top 13 articles on BDCnetwork.com for the first six months of 2013.
| Jul 3, 2013
World's biggest freestanding building opens in China
Measuring a stout 100 meters high, 500 meters long, and 400 meters wide, the New Century Global Centre in the Tianfu New District of Chengdu, China, is officially the world's largest freestanding building.
| Jul 3, 2013
Mall of America will double in size after $2.5 billion expansion
The nation's largest indoor mall will undergo a $2.5 billion, 10-year expansion project that will add attractions like an NHL-sized skating rink and an indoor water park.
| Jul 3, 2013
Architects team with HUD to promote 'Rebuild By Design' competition for Hurricane Sandy recovery effort
The American Institute of Architects (AIA) today announced a communications campaign urging its membership to enter the “Rebuild by Design” multi-stage regional design competition announced by Department of Housing and Urban Development (HUD) Secretary Shaun Donovan on June 20.
| Jul 2, 2013
LEED v4 gets green light, will launch this fall
The U.S. Green Building Council membership has voted to adopt LEED v4, the next update to the world’s premier green building rating system.
| Jul 1, 2013
Firestone Building Products Company LLC Announces Sustainability Report
Firestone Building Products Company, LLC, the leading manufacturer of superior “Roots to Rooftops” products for commercial building performance solutions, today announced the release of its 2012 Sustainability Report. The report, the first for Firestone Building Products Company, covers the fiscal 2012 year and is available for download at firestonebpco.com.
| Jul 1, 2013
LEGOLAND builds 12-foot replica of One World Trade Center
The LEGOLAND Discovery Center Westchester in Yonkers, N.Y., celebrated the completion of a LEGO replica of One World Trade Center by lighting the 12-foot-tall, 100-pound model.
