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 11, 2011
Four-story library at Salem State will hold half a million—get this—books!
Salem State University in Massachusetts broke ground on a new library and learning center in December. The new four-story library will include instructional labs, group study rooms, and a testing center. The modern, 124,000-sf design by Boston-based Shepley Bulfinch includes space for 500,000 books and study space for up to a thousand students. Sustainable features include geothermal heating and cooling, rainwater harvesting, and low-flow plumbing fixtures.
| Feb 11, 2011
Green design, white snow at Egyptian desert retail complex
The Mall of Egypt will be a 135,000-sm retail and entertainment complex in Cairo’s modern 6th of October district. The two-story center is divided into three themed zones—The City, which is arranged as a series of streets lined with retail and public spaces; The Desert Valley, which contains upscale department stores, international retailers, and a central courtyard for music and other cultural events; and The Crystal, which will include leisure and entertainment venues, including a cinema and indoor snow park. RTKL is designing the massive complex to LEED Silver standards.
| Feb 10, 2011
7 Things to Know About Impact Glazing and Fire-rated Glass
Back-to-basics answers to seven common questions about impact glazing and fire-rated glass.
| Feb 10, 2011
Medical Data Center Sets High Bar for BIM Design Team
The construction of a new data center becomes a test case for BIM’s ability to enhance project delivery across an entire medical campus.
| Feb 10, 2011
Zero Energy Buildings: When Do They Pay Off in a Hot and Humid Climate?
There’s lots of talk about zero energy as the next big milestone in green building. Realistically, how close are we to this ambitious goal? At this point, the strategies required to get to zero energy are relatively expensive. Only a few buildings, most of them 6,000 sf or less, mostly located in California and similar moderate climates, have hit the mark. What about larger buildings, commercial buildings, more problematic climates? Given the constraints of current technology and the comfort demands of building users, is zero energy a worthwhile investment for buildings in, for example, a warm, humid climate?
| Feb 9, 2011
Hospital Construction in the Age of Obamacare
The recession has hurt even the usually vibrant healthcare segment. Nearly three out of four hospital systems have put the brakes on capital projects. We asked five capital expenditure insiders for their advice on how Building Teams can still succeed in this highly competitive sector.
| Feb 9, 2011
Businesses make bigger, bolder sustainability commitments
In 2010, U.S. corporations continued to enhance their sustainable business efforts by making bigger, bolder, longer-term sustainability commitments. GreenBiz issued its 4th annual State of Green Business report, a free downloadable report that measures the progress of U.S. business and the economy from an environmental perspective, and highlights key trends in corporate culture in regard to the environment.
| Feb 8, 2011
AIA names 104 members to College of Fellows
The Fellowship program was developed to elevate those architects who have made a significant contribution to architecture and society and who have achieved a standard of excellence in the profession. Election to fellowship not only recognizes the achievements of architects as individuals, but also their significant contribution to architecture and society on a national level.
| Feb 4, 2011
President Obama: 20% improvement in energy efficiency will save $40 billion
President Obama’s Better Buildings Initiative, announced February 3, 2011, aims to achieve a 20% improvement in energy efficiency in commercial buildings by 2020, improvements that will save American businesses $40 billion a year.
| Jan 31, 2011
Cuningham Group Architecture launches Healthcare studio with Lee Brennan
International design firm Cuningham Group Architecture, P.A. (Cuningham Group) has announced the arrival of Lee Brennan, AIA, as Principal and Leader of its new Healthcare studio. Brennan comes to Cuningham Group with over 30 years of professional experience, 22 of those years in healthcare, encompassing all aspects of project delivery, from strategic planning and programming through design and construction. The firm’s new Healthcare studio will enhance Cuningham Group’s expertise in leisure and entertainment, education, mixed-use/housing and workplace environments.