Construction employment continued to show strength across much of the United States through November 2017, when there were 191,000 more workers in the construction industry than during the same month a year earlier, and the construction unemployment rate fell by 0.7% to 5%, the lowest it’s been on record for the month of November, according to estimates released yesterday by Associated Builders and Contractors, a national trade group representing more than 21,000 members.
However, the industry still struggles with labor shortages that could be inhibiting investment and new construction.
During the first nine months of 2017, month-by-month employment growth was “minimal,” due primarily to “historically low unemployment” that limited the new construction talent pool, according to JLL’s Construction Outlook for the third quarter of 2017, which the market research and consulting firm released late last month.
During the third quarter of 2017, construction-related spending inched up by only 1.9% from the same period in 2016. “While topline spending is still increasing, consecutive quarters are demonstrating smaller and smaller gains over past years—underlining the trajectory towards a mature and stable industry,” JLL writes. Percentage growth of year-over-year spending decreased for nine out of the preceding 11 months, but was still above zero, “pointing to a tapering growth curve.”
With qualified construction workers being harder to find, labor costs were volatile through the first nine months of last year. Image: JLL Research
Citing Census Bureau estimates, Associated Builders and Contractors posted that nonresidential construction spending declined in November by 1.3%, to $719.2 billion, compared to the same month a year earlier. Private nonres spending was down by 3.1%, while public-sector nonres spending grew by 1.7%. The gainers included commercial, educational, lodging, transportation, healthcare, and public safety. Manufacturing construction took the biggest hit, down 15.6%.
Commercial real estate has proven over the past several years that it can perform well regardless of how the economy in general is growing. “Right now we see little in fundamentals to cause concern about real estate as an asset class,” JLL writes.
Public construction, infrastructure and public works projects picked up steam during the third quarter of 2017, while single-family home construction grew at nearly double-digit annualized growth, which is expected to continue in 2018. Multifamily starts, on the other hand, dipped.
While the groundbreaking of large scale private commercial projects began to scale back due to stretched-out timelines, commercial renovation and fit-out work strengthened, and should prevail through the next several quarters and beyond into 2019, JLL predicts.
The cost of building slowed in the third quarter, up by just 3% from third quarter 2016. But it still grew faster than construction spending primarily because of increasing labor costs. (Wages grew by nearly 3.4%, on an annualized basis, in the third quarter of 2017.) Indeed, JLL expects labor shortages to persist through 2018, at least, and for construction costs to be up another 3% this year. JLL expects wage growth to accelerate, potentially hitting 5% or higher during peak building seasons.
The severe weather events that hit certain areas of the country had a surprisingly minor impact on the availability of most building materials. Nevertheless, materials costs rose by 3% in the third quarter compared to the same period a year ago, and those costs “are beginning to outpace current demand,” says JLL. Impending tariffs on Canadian lumber imports could jack up lumber prices for U.S. purchasers by 20% this year.
Manpower shortages, and the prospect that labor and products will cost more, could finally push the construction industry to embrace technology to a greater degree than it has done so to this point. JLL sees BIM, artificial intelligence and big data, and prefab and offsite construction as the three technologies that show the most promise this year.
Related Stories
| Jan 4, 2011
6 green building trends to watch in 2011
According to a report by New York-based JWT Intelligence, there are six key green building trends to watch in 2011, including: 3D printing, biomimicry, and more transparent and accurate green claims.
| Jan 4, 2011
LEED 2012: 10 changes you should know about
The USGBC is beginning its review and planning for the next version of LEED—LEED 2012. The draft version of LEED 2012 is currently in the first of at least two public comment periods, and it’s important to take a look at proposed changes to see the direction USGBC is taking, the plans they have for LEED, and—most importantly—how they affect you.
| Jan 4, 2011
California buildings: now even more efficient
New buildings in California must now be more sustainable under the state’s Green Building Standards Code, which took effect with the new year. CALGreen, the first statewide green building code in the country, requires new buildings to be more energy efficient, use less water, and emit fewer pollutants, among many other requirements. And they have the potential to affect LEED ratings.
| Jan 4, 2011
New Years resolutions for architects, urban planners, and real estate developers
Roger K. Lewis, an architect and a professor emeritus of architecture at the University of Maryland, writes in the Washington Post about New Years resolutions he proposes for anyone involved in influencing buildings and cities. Among his proposals: recycle and reuse aging or obsolete buildings instead of demolishing them; amend or eliminate out-of-date, obstructive, and overly complex zoning ordinances; and make all city and suburban streets safe for cyclists and pedestrians.
| Jan 4, 2011
An official bargain, White House loses $79 million in property value
One of the most famous office buildings in the world—and the official the residence of the President of the United States—is now worth only $251.6 million. At the top of the housing boom, the 132-room complex was valued at $331.5 million (still sounds like a bargain), according to Zillow, the online real estate marketplace. That reflects a decline in property value of about 24%.
| Jan 4, 2011
Grubb & Ellis predicts commercial real estate recovery
Grubb & Ellis Company, a leading real estate services and investment firm, released its 2011 Real Estate Forecast, which foresees the start of a slow recovery in the leasing market for all property types in the coming year.
| Jan 4, 2011
Furniture Sustainability Standard - Approved by ANSI and Released for Distribution
BIFMA International recently announced formal American National Standards Institute (ANSI) approval and release of the ANSI/BIFMA e3-2010 Furniture Sustainability Standard. The e3 standard represents a structured methodology to evaluate the "sustainable" attributes of furniture products and constitutes the technical criteria of the level product certification program.
| Dec 28, 2010
Project of the Week: Community college for next-gen Homeland Security personnel
The College of DuPage, Glen Ellyn, Ill., began work on the Homeland Security Education Center, which will prepare future emergency personnel to tackle terrorist attacks and disasters. The $25 million, 61,100-sf building’s centerpiece will be an immersive interior street lab for urban response simulations.
| Dec 20, 2010
Architect Adrian D. Smith on zero-energy cities, new technologies, and high density.
Adrian D. Smith, FAIA, RIBA, is co-founder (with Gordon Gill) of Adrian Smith + Gordon Gill Architecture, Chicago. Previously, he was a design partner in the Chicago office of Skidmore, Owings & Merrill (1980-2003) and a consulting design partner from 2004 to 2006. His landmark structures include the Jin Mao Tower (Shanghai), Rowes Wharf (Boston), and Burj Khalifa (Dubai, U.A.E.), the world’s tallest structure. He recently collaborated with Gordon Gill to design the world’s first net-zero-energy skyscraper, Pearl River Tower, now nearing completion in Guangzhou, China. This account is based on his recent remarks at the Illinois Institute of Technology.
