Although the construction recovery continues to lag other sectors as well as the overall U.S. economy, the industry is finally seeing a rebound. Commercial real estate giant Jones Lang LaSalle recently released its Summer 2013 Construction Highlights report, which found that there are some sectors (such as energy and high-tech) driving demand for construction, while a few major cities are starting to record increased levels of speculative office building developments. However, with construction demand on the rise in some areas, JLL documents labor shortages and material costs increasing as well.
Local Markets
The recovery theme in the U.S. construction industry can be easily identified as lagging other sectors and the overall U.S. economy. Among many challenges specific to the construction industry, the fact that the overall US.. labor market recovery has been so prolonged is not helping a rebound in construction, which depends on a growing workforce to expand demand across property types. The previous “bright spot” in the construction world – public construction – has taken a backseat in the recovery as the Federal government trims budgets and pulls back on pending.
While job numbers year-over-year are improved, construction employment was hard hit in the month of April, showing a net loss of 6,000 jobs, very much a function of pullback in non-residential sectors including public construction. With the long-awaited rebound in the housing market now permeating the single-family realm, however, job gains and increases in construction-put-in place for residential construction have materialized, and should fuel stronger growth. President Obama’s persistent efforts to increase infrastructure construction funding and MAP-21 investment, already accounted for in budgets, could also ultimately help shore up weaker areas of the construction industry during the next 12 months.
Market Highlights
· Seattle: Technology drives construction, with just over 1 MSF delivered in 2012, much of it pre-leased to Amazon. The spec development pipeline is picking up.
· Portland: Owner-user office development comprises the major projects under construction. Several speculative projects are proposed, but adaptive reuse is the preferred strategy.
· San Francisco: Office and multi-family construction is booming as developers work to meet demand from the growing economy, driven by the technology industry.
· Los Angeles: The first skyscraper to be added to the CBD in over 20 years is underway. Upon completion, the Wilshire Grand will feature retail, office and hospitality components.
· Orange County: Vacancy remains high and rents are still too low to justify any spec development at this time. However, four sizable build-to-suit projects are currently underway.
· Boston: Four build-to-suit projects are underway totaling 2.5 MSF in Boston. Cambridge has 2.5 MSF of new construction (38% lab space, 62% office).
· New York: Construction to begin on more than 5.0 MSF of office space during the next five years, with potentially 25 MSF delivered over next two decades.
· Philadelphia: Liberty Property Trust will break ground on a build-to-suit project for Vanguard. The six-story, 205,000 SF facility will be built to meet LEED standards.
· Washington DC: Nearly 6.2 MSF of office construction is underway. Over one-third of the under construction inventory has garnered preleases.
· Atlanta: Demand for interior build outs up in the last six to nine months; upward pressure on construction costs. Pricing has bottomed and expected to rise due to housing market improvements.
· Minneapolis: Construction activity is on the rise, but so are costs. Construction prices increased 3.2% since last year. Recent negotiations with labor unions will result in average annual increases in labor costs of 2-2.5% through 2016.
· Chicago: No office construction is underway, but River Point is in development stages and broke ground in Q4 2012. Multifamily in the Loop and River North is expanding aggressively, with about 1,000 units under construction.
· Dallas: Availability of the trades is becoming an issue as new construction activity accelerates. This will likely lead to higher labor costs and the need for higher contingencies in project proformas.
· Houston: Houston’s booming energy market continues to drive new office construction. Houston’s CBD market is expecting 4 MSF of new office deliveries in the next 36 to 48 months.
Related Stories
| Apr 10, 2013
6 funding sources for charter school construction
Competition for grants, loans, and bond financing among charter schools is heating up, so make your clients aware of these potential sources.
| Apr 10, 2013
23 things you need to know about charter schools
Charter schools are growing like Topsy. But don’t jump on board unless you know what you’re getting into.
| Apr 9, 2013
FMI predicts 8% rise in construction put in place for 2013
FMI, the largest provider of management consulting and investment banking services to the engineering and construction industry released today its Q1-2013 Construction Outlook. The forecast for total construction-put-in-place for 2013 continues to show an increase of 8% over 2012 levels.
| Apr 8, 2013
Most daylight harvesting schemes fall short of performance goals, says study
Analysis of daylighting control systems in 20 office and public spaces shows that while the automatic daylighting harvesting schemes are helping to reduce lighting energy, most are not achieving optimal performance, according to a new study by the Energy Center of Wisconsin.
| Apr 6, 2013
Lord, Aeck & Sargent and Urban Collage merge
In a move that brings full-service planning expertise to its already well-established architecture practice, Lord, Aeck & Sargent (LAS) has merged with Urban Collage (UC), one of the largest urban and campus planning and design firms in the Southeast. Combining these firms’ talents was made official today. UC plans to retain its name for the foreseeable future.