According to expert forecasters, multifamily projects, the
Panama Canal expansion, and the petroleum industry’s “shale gale” could be
saving graces for commercial AEC firms seeking growth opportunities in an
economy that’s provided its share of recent disappointments.
In a spring industry roundtable hosted by Reed Construction
Data, economists from the American Institute of Architects, the Associated
General Contractors of America, and RCD discussed the mixed signals in
commercial design and construction, and the seemingly perennial predictions of
a breakthrough.
The overall conclusion, according to Bernard Markstein, U.S.
Chief Economist for RCD? The economy’s improving and employment is growing, but
both ought to be better by now.
Nevertheless, Markstein identifies several positives in the
overall picture. “The Federal Reserve has started to taper its activity,
without too much impact on interest rates; these remain historically low,” he
says. “Lenders are slowly loosening lending standards. We’ve already seen most
of the impact of sharp cuts in federal spending, and those should be done for
now.”
Multifamily continues to be a particularly bright spot,
according to Markstein. Other sectors remain more problematic, with a brutal
winter limiting overall activity in many regions.
Kermit Baker, Chief Economist for the AIA, admits that
“nonresidential construction has had a hard time building momentum behind the
recovery,” and that the AIA Architecture Billings Index keeps hitting soft
spots. Reconstruction, rather than new builds, currently represents a
larger-than-usual share of the business, at about 25% of nonresidential
construction activity.
Baker predicts that firms doing lodging, office, retail, and
manufacturing projects should see decent results this year, with hotel construction
especially hot (tracking at 37% growth from February 2013 to February 2014,
according to the U.S. Census Bureau). Communication-related construction is
another booming area, with growth at more than 50% year over year.
However, some sectors that represent bread-and-butter
business for many top architecture firms are looking grimmer, especially
healthcare (off about 4% from February to February) and education (down about
7%). Baker says project financing remains “a chronic problem.”
He believes the long-range outlook is better, however. “New
design contracts have been growing, and those stats lead construction. Our
member firms are building up more work.”
Ken Simonson, Chief Economist for the AGC of America,
reported that his group’s members think the manufacturing,
retail/lodging/warehouse, private office, and healthcare sectors should grow
this year compared with 2013. Most members are feeling positive overall, he
says. “For the first time, two-thirds of our respondents expect the market to
upturn either this year or next year,” Simonson says. “In previous years I have
been more optimistic than our members. Not this year.”
Tighter government spending on education and infrastructure,
consumers’ interest in online buying, and companies’ drive to shrink office
space per employee have all restrained commercial AEC growth, according to
Simonson. But there are positive trends, as well. In addition to acknowledging
the continued strength of the multifamily sector, he says big infrastructure
projects provide ample opportunities for AEC firms positioned to take advantage
of them.
In particular, Simonson points to massive development
related to the so-called “shale gale”: exploitation of America’s petroleum
reserves through advanced extraction technologies (notably, fracking). The
employment is drawing large numbers of workers to areas that have previously
been sparsely populated. Primary “shale gale” zones, or “plays,” include the
Bakken (North Dakota/Montana/Saskatchewan), the Niobrara (Kansas/
Wyoming), the Permian (Texas/New Mexico), the Eagle Ford
(Texas), the Haynesville (Texas/Louisiana), and the Marcellus (West
Virginia/Pennsylvania/New York).
Firms that do large infrastructure projects related to
roads, site prep, piping, rail lines, and drilling obviously will benefit, but
there’s also an urgent need for housing (typically, modular dorms and
extended-stay hotels), recreational facilities, and food service. Nearby
existing towns also benefit, not only in terms of hotel, apartment, and
restaurant construction but also retail, healthcare, education, and government
projects. The burgeoning industry entails environmental controversy, turbulent
politics, and an uncertain future, but for now, building is proceeding at a
rapid clip.
Simonson also points to upcoming development in U.S. port
cities on both coasts and the Gulf of Mexico linked to expansion of the Panama
Canal, which is set to be completed next year. Again, in addition to big
infrastructure, related facilities will be needed: warehouses, terminals,
equipment garages, and even data centers. Incoming workers may also need new
housing and services facilities. Commercial AEC firms with the right
capabilities could reap big gains.
Source: BDC
Network
No comments:
Post a Comment