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
| Oct 12, 2010
The Watch Factory, Waltham, Mass.
27th Annual Reconstruction Awards — Gold Award. When the Boston Watch Company opened its factory in 1854 on the banks of the Charles River in Waltham, Mass., the area was far enough away from the dust, dirt, and grime of Boston to safely assemble delicate watch parts.
| Oct 12, 2010
Cuyahoga County Soldiers’ and Sailors’ Monument, Cleveland, Ohio
27th Annual Reconstruction Awards—Gold Award. The Cuyahoga County Soldiers’ and Sailors’ Monument was dedicated on the Fourth of July, 1894, to honor the memory of the more than 9,000 Cuyahoga County veterans of the Civil War.
| Oct 12, 2010
Building 13 Naval Station, Great Lakes, Ill.
27th Annual Reconstruction Awards—Gold Award. Designed by Chicago architect Jarvis Hunt and constructed in 1903, Building 13 is one of 39 structures within the Great Lakes Historic District at Naval Station Great Lakes, Ill.
| Oct 12, 2010
Full Steam Ahead for Sustainable Power Plant
An innovative restoration turns a historic but inoperable coal-burning steam plant into a modern, energy-efficient marvel at Duke University.
| Oct 12, 2010
From ‘Plain Box’ to Community Asset
The Mid-Ohio Foodbank helps provide 55,000 meals a day to the hungry. Who would guess that it was once a nondescript mattress factory?
| Oct 11, 2010
HGA wins 25-Year Award from AIA Minnesota
HGA Architects and Engineers won a 25-Year Award from AIA Minnesota for the Willow Lake Laboratory.
| Oct 11, 2010
MBMA Releases Fire Resistance Design Guide for metal building systems
The Metal Building Manufacturers Association (MBMA) announces the release of the 2010 Fire Resistance Design Guide for Metal Building Systems. The guide provides building owners, architects, engineers, specifiers, fire marshals, building code officials, contractors, product vendors, builders and metal building manufacturers information on how to effectively meet fire resistance requirements of a project with metal building systems.
| Oct 11, 2010
Rhode Island is the first state to adopt IGCC
Rhode Island is the first state to adopt the International Green Construction Code (IGCC). The Rhode Island Green Buildings Act identifies the IGCC as an equivalent standard in compliance with requirements that all public agency major facility projects be designed and constructed as green buildings. The Rules and Regulations to implement the Act take effect in October 2010.
| Oct 8, 2010
Union Bank’S San Diego HQ awarded LEED Gold
Union Bank’s San Diego headquarters building located at 530 B Street has been awarded LEED Gold certification from the Green Building Certification Institute under the standards established by the U.S. Green Building Council. Gold status was awarded to six buildings across the United States in the most recent certification and Union Bank’s San Diego headquarters building is one of only two in California.
| Oct 6, 2010
From grocery store to culinary school
A former West Philadelphia supermarket is moving up the food chain, transitioning from grocery store to the Center for Culinary Enterprise, a business culinary training school.