CMD Group, (formerly known as Reed Construction Data) is
one of the leading providers of construction information in North America. On
November 20th, CMD held its sixth annual complimentary economic webcast
entitled ‘Is the Pace of Construction Investment Set to Quicken?’. Expert
speakers included Chief Economists, Alex Carrick of CMD, Ken Simonson of
Associated General Contractors of America, and Kermit Baker of American
Institute of Architects. Always a well-coordinated webcast with valuable
information, this year’s event proved to be nothing less. Discussions included
growth projections, active sectors, industry employment, and the positive and
negative trends affecting the industry’s progress.
All panel experts expressed the same sentiment – that a
turning point had finally occurred in the industry this past May. Carrick said
that was when U.S. total construction starts and architectural billings began
increasing. Companies stopped looking in their rear-view mirrors trying to
outrun the Great Recession and began to look forward to the future. While it’s
still going to take several more years to reach pre-recession levels, the
experts say we should see healthy growth in construction in the second half of
2015.
Active vertical sectors
Playing significant roles in boosting construction
activity are the petroleum, manufacturing, and information technology sectors.
And you can’t forget what the ‘Shale Gale’ and Panama Canal expansion have done
for the positive numbers in growth and employment levels.
Multifamily structures remain as one of the brightest
spots in the industry. Vacancy rates are showing multi-year lows in most cities
as the demand for urban living increases. According to Carrick, during the
first three quarters of 2014, when compared to the Q1s to Q3s of the previous
five years, the multifamily market jumped 51.6%. Its upturn should last into 2015.
Other markets supporting construction activity are
warehouses (up 50.4%), sports arenas and convention centers (up almost 49%),
and retail (up 36.5%).
2015 forecast by expert
Carrick
projects an increase in construction starts for the next four years, and
believes spending on lodging, hospitals/clinics, and warehouses will almost
double from 2013 numbers.
Simonson
notes warehouses, lodging, manufacturing, oil and gas fields, pipelines, rail,
and data centers as markets to watch. He also forecasts a 6% to 10% annual
increase in total construction spending through 2017.
While
Baker concedes that the Architecture Billings Index has shown volatility, the
industry is seeing a strong comeback. According to AIA’s new design contracts
index, billings will continue to accelerate.
Concerns about the industry’s growth, employment, and talent
acquisition
Among all of the positive news are concerns as well.
Simonson says there are three trends that are negatively affecting certain vertical
markets:
- Governments are spending less on schools and infrastructure;
- Consumers are shopping online instead of at actual stores; and
- Employers are reducing the amount of office space per employee.
Construction labor is an important indicator for forecasting
growth and, as Simonson pointed out, the industry’s unemployment rate fell to
6.5% in October from 17.3% four years ago. Although that is a positive sign, we
do have to keep that statistic in perspective because thousands of people left
the industry during the recession to find employment elsewhere, and the current
employment rate is still 21% less than the peak of 10 million professionals
during April 2006. That equates to 1.6 million fewer jobs.
Simonson
is also concerned there may be a labor shortage, even more serious than there
is now due to the recent increase in construction spending. A recent AGC survey
showed that more than 80% of respondents reported having difficulty filling
certain positions. He said widespread shortages are possible with the shrinking
availability of veterans, competition from other sectors, and upcoming
retirements. This situation could then push up the employment cost index. Baker
elaborated further in saying that the average age of the workforce has
increased since the recession and there are fewer people in the industry who
are under 35 years old. This is prompting the creation of apprenticeship and
training programs.
According
to Manpower’s annual Talent Shortage Survey, four in ten American employers are
struggling to fill open positions. Among the hardest jobs to fill for the fifth
consecutive year are the skilled trades (plumbers, electricians, carpenters,
and bricklayers), laborers, and engineers. During CMD’s webcast, it was noted
that the hardest craft positions to fill are carpenters, roofers, equipment
operators, plumbers, and electricians. The professionals that are difficult to
find are project managers, supervisors, and estimators.
As executive search consultants focusing exclusively in
construction, engineering, facilities, and real estate for more than 22 years,
we have seen all of the trends and challenges noted by CMD’s panel of experts.
We have watched our client organizations work diligently over the past several
years to overcome their challenges, streamline their businesses, and leverage
their capabilities. We are grateful to have had the opportunity to work closely
with them, and to have played a part in their strategies and successes, and
look forward to the opportunities that 2015 will bring to all of us.
CMD’s webcast was sponsored by Info Tech International
LLC. To review a full copy of the presentation, visit CMD’s website.
Source: Helbing
Associates Inc.
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