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
| Jan 7, 2011
BIM on Target
By using BIM for the design of its new San Clemente, Calif., store, big-box retailer Target has been able to model the entire structural steel package, including joists, in 3D, chopping the timeline for shop drawings from as much as 10 weeks down to an ‘unheard of’ three-and-a-half weeks.
| Jan 7, 2011
How Building Teams Choose Roofing Systems
A roofing survey emailed to a representative sample of BD+C’s subscriber list revealed such key findings as: Respondents named metal (56%) and EPDM (50%) as the roofing systems they (or their firms) employed most in projects. Also, new construction and retrofits were fairly evenly split among respondents’ roofing-related projects over the last couple of years.
| Jan 7, 2011
Total construction to rise 5.1% in 2011
Total U.S. construction spending will increase 5.1% in 2011. The gain from the end of 2010 to the end of 2011 will be 10%. The biggest annual gain in 2011 will be 10% for new residential construction, far above the 2-3% gains in all other construction sectors.
| Jan 7, 2011
Mixed-Use on Steroids
Mixed-use development has been one of the few bright spots in real estate in the last few years. Successful mixed-use projects are almost always located in dense urban or suburban areas, usually close to public transportation. It’s a sign of the times that the residential component tends to be rental rather than for-sale.
| Jan 4, 2011
Product of the Week: Zinc cladding helps border crossing blend in with surroundings
Zinc panels provide natural-looking, durable cladding for an administrative building and toll canopies at the newly expanded Queenstown Plaza U.S.-Canada border crossing at the Niagara Gorge. Toronto’s Moriyama & Teshima Architects chose the zinc alloy panels for their ability to blend with the structures’ scenic surroundings, as well as for their low maintenance and sustainable qualities. The structures incorporate 14,000 sf of Rheinzink’s branded Angled Standing Seam and Reveal Panels in graphite gray.
| 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.
