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
| Feb 21, 2013
BD+C's 2008 White Paper: Green Buildings + Climate Change
In this White Paper, we provide concrete ways in which AEC professionals can have a positive role in addressing climate change.
| Feb 21, 2013
Holl videos discuss design features of Chengdu ' Porosity Block' project
Architect Steven Holl has released two short films describing the development of Sliced Porosity Block in Chengdu, China.
| Feb 21, 2013
Construction team chosen for world's tallest building in Jeddah, Saudi Arabia
Construction team chosen for world's tallest building in Jeddah, Saudi Arabia.
| Feb 21, 2013
Stephen C. Wright joins Leo A Daly as Managing Principal in D.C.
International architecture, planning, engineering, interior design and program management firm LEO A DALY welcomes Stephen C. Wright, AIA, as the new managing principal of the Washington, D.C., office. Wright will oversee the D.C. team in executing federal, local government, private and non-profit projects and pursuing new business opportunities in markets including aviation, corporate and commercial, higher education, hospitality and institutional facilities.
| Feb 20, 2013
Architecture Billings Index sees strongest growth since 2007
The American Institute of Architects reported the January ABI score was 54.2, up sharply from 51.2 in December. This score reflects a strong increase in demand for design services.
| Feb 19, 2013
'Pop-up' proposal would create movable cultural venue for NYC
The Culture Shed, a proposed 170,000-sf project for New York City's Hudson Yards development, could be the ultimate in "pop-up" facilities.
| Feb 18, 2013
Top 10 kitchen and bath design trends for 2013
Gray color schemes and transitional styles are among the top trends identified by more than 300 kitchen and bath design experts surveyed by the National Kitchen & Bath Association (NKBA).
| Feb 17, 2013
Suffolk University’s $62 million academic building gets the go-ahead
The Boston Redevelopment Authority board yesterday unanimously approved Suffolk University’s plans to move forward with a new campus building at 20 Somerset St. that will feature general-use and science classrooms, a light-filled cafeteria/function space, and indoor and outdoor lounging areas.