Gilbane, the family owned construction and real estate development firm, is predicting stronger spending on nonresidential building this year, even if the number of projects started doesn’t appreciate significantly.
“Even if new starts growth were to turn flat for the rest of 2015 (which is not expected), those starts already recorded over the past 12 months indicate spending for nonresidential buildings in 2015 will increase 15% over 2014, the best growth since 2007,” writes the company in its “Building For the Future” Spring report on Construction Economics and Market Conditions.
Gilbane estimates that total spending for nonresidential building construction will reach $370 billion this year, a 15.3% increase. The company expects nonresidential starts to slow in 2015 but still hit 218,052 units, 7.4% ahead of the previous year.
Educational building is expected to account for 22.7% of total nonresidential construction spending in 2015, down from its 24.4% market share in 2014 and 30.3% in 2010. Still, Gilbane foresees spending on educational building to be up 7% this year, to $83.8 billion, the first substantial increase since 2008.
The manufacturing sector, whose market share of total nonresidential construction spending is projected to be flat at 17.2% this year, should see its spending amounts increase by 15% to $63.5 billion, which would be on top of a 15% gain in 2014. Spending on office construction is expected to grow 17.5% to $52.6 billion. And construction spending on commercial retail will be up 12.5% to $64.2 billion.
Gilbane projects that nonresidential construction revenue will increase by 9.1%. However, using historical benchmarks as its guide, the company believes that at least half of that gain could be attributable to “rapidly increasing inflation,” which had grown by 11% in the previous three years.
As other industry watchers have noted, Gilbane isn’t seeing much inflation on the materials side, with some exceptions like gypsum and precast concrete. Gilbane is more concerned, though, about construction hiring trends.
As of March 2015, there were 6.344 million construction employees, according to Bureau of Labor Statistics’ data. The unemployment rate in construction is now at 9.5% after hitting a low of 6.4% in October 2014. Total hiring in the construction industry was up by an estimated 15% in the first quarter of this year.
Gilbane believes that companies aren’t always using the right metrics to determine their hiring levels.
It notes that since 2012, the number of workers to complete $1 billion of constant volume has increased from about 5.65 million to 6.1 million. That would imply an 8% loss in productivity in three years. But Gilbane insists this “loss” has more to do with overall cost reductions than with projects being over-staffed.
“Workload volume should be used for planning the size of the workforce,” Gilbane states. “As an example, at the 2008 peak of construction cost, a building cost $12 million and took 100 men per year to build. In 2010, that same building potentially cost as little as $10 million to build, 20% less. Did it take 20% fewer men per year to build it? No, certainly not. That would be the fallacy of trying to determine jobs needed based on unadjusted revenue.”
To bolster its argument, Gilbane notes that historical averages (adjusted for inflation) since year 2000 show the number of direct construction jobs supported by $1 billion in construction spending varies +/- from 6,000 jobs. That calculates to one job for every $165,000 (in 2014 dollars) spent on construction, or 6.0 to 7.0 jobs per $1,000,000 spent.
Related Stories
| May 18, 2011
Addition provides new school for pre-K and special-needs kids outside Chicago
Perkins+Will, Chicago, designed the Early Learning Center, a $9 million, 37,000-sf addition to Barrington Middle School in Barrington, Ill., to create an easily accessible and safe learning environment for pre-kindergarten and special-needs students.
| May 18, 2011
Raphael Viñoly’s serpentine-shaped building snakes up San Francisco hillside
The hillside location for the Ray and Dagmar Dolby Regeneration Medicine building at the University of California, San Francisco, presented a challenge to the Building Team of Raphael Viñoly, SmithGroup, DPR Construction, and Forell/Elsesser Engineers. The 660-foot-long serpentine-shaped building sits on a structural framework 40 to 70 feet off the ground to accommodate the hillside’s steep 60-degree slope.
| May 18, 2011
New center provides home to medical specialties
Construction has begun on the 150,000-sf Medical Arts Pavilion at the University Medical Center in Princeton, N.J.
| May 18, 2011
Improvements add to Detroit convention center’s appeal
Interior and exterior renovations and updates will make the Detroit Cobo Center more appealing to conventioneers. A new 40,000-sf ballroom will take advantage of the center’s riverfront location, with views of the river and downtown.
| May 18, 2011
One of Delaware’s largest high schools seeks LEED for Schools designation
The $82 million, 280,000-sf Dover (Del.) High School will have capacity for 1,800 students and feature a 900-seat theater, a 2,500-seat gymnasium, and a 5,000-seat football stadium.
| May 18, 2011
Carnegie Hall vaults into the 21st century with a $200 million renovation
Historic Carnegie Hall in New York City is in the midst of a major $200 million renovation that will bring the building up to contemporary standards, increase educational and backstage space, and target LEED Silver.
| May 17, 2011
Sustainability tops the syllabus at net-zero energy school in Texas
Texas-based firm Corgan designed the 152,200-sf Lady Bird Johnson Middle School in Irving, Texas, with the goal of creating the largest net-zero educational facility in the nation, and the first in the state. The facility is expected to use 50% less energy than a standard school.
| May 17, 2011
Gilbane partners with Steel Orca on ultra-green data center
Gilbane, along with Crabtree, Rohrbaugh & Associates, has been selected to partner with Steel Orca to design and build a 300,000-sf data center in Bucks County, Pa., that will be powered entirely through renewable energy sources--gas, solar, fuel cells, wind and geo-thermal. Completion is scheduled for 2013.
| May 17, 2011
Should Washington, D.C., allow taller buildings?
Suggestions are being made that Washington revise its restrictions on building heights. Architect Roger Lewis, who raised the topic in the Washington Post a few weeks ago, argues for a modest relaxation of the height limits, and thinks that concerns about ruining the city’s aesthetics are unfounded.