The economy has been slowing down, and isn’t growing as
quickly as expected, said Alex Carrick, chief
economist at CMD, formerly Reed Construction Data, during
Thursday’s construction outlook webinar hosted by CMD. That statement was
underscored when the stock market closed down, cutting the year’s gains to a measly 0.10%.
And the wobbly economy was a concern to the other top
economists in the industry, Ken Simonson of the Associated General
Contractors of America and Kermit Baker of the American Institute of Architects.
The construction-building picture now, going forward
Total nonresidential construction last year was more than
$606 billion, up 7.1% from a year earlier, according to the Census Bureau. Leading the
charge were lodging, office, and manufacturing construction projects. Total
residential construction last year was $354 billion, up about 3.5% from a year
earlier, led in large part by growth in multifamily construction.
And this year is off to a reasonable start as well, the
economists report, citing continuing strength in multifamily housing starts, as
well as power and manufacturing projects. Lodging, too, has been a strength,
but Baker sees this as late in the cycle, saying most of the “growth is behind
us.”
However, all three see construction growth as “spotty”
and “uneven,” and note there are challenges.
Challenges
For instance, the number of civil engineering projects in
2104 was up more than 9% from a year earlier, according to Carrick, but he sees
that increase declining to 4.2% this year and yet another declining increase to
only between 2.2% and 3.3% over the next several years.
Then, there’s MAP-21, the bill that funds
transportation infrastructure projects in the country, is due to expire at the
end of this month.
Ken Simonson and legislators still have no agreement
about how to fund it. Because of that, Simonson sees a no growth this year or
even a 5% decline in spending on highway and roadwork projects this year, and
even a cancellation of contracts if the current bill lapses with nothing in its
place.
He also forecasts a spending on health care facilities to
remain steady or even decline 5%, although Carrick sees potential for a
double-digit spending increase, saying “this [sector] has got to start taking
off because as a society as a whole we’ve become health conscious and there’s
the aging baby boomers.” Both note that it’s strange not to have seen this
particular segment tick up yet as the population ages and is
starting to live longer.
The availability of construction workers is also an
increasing concern. So many were let go during the Great Recession that the
available workforce has shrunk. And, it’s getting older as fewer young people
and immigrants enter the field. Baker says the industry “needs to attract more
immigrants, younger workers, and make it more attractive to women if we want to
see workforce numbers worthy of a growing industry.”
In addition, Simonson notes three trends that are holding
back the need for building: “Government spends less on schools, infrastructure;
consumers switch from stores to online buying; and employers shrink office
space per employee.”
Bright spots
Kermit Baker
Remember, all three see the industry growing. Simonson
and Carrick note the increase in construction activity at tidewater ports in
preparation for the large Panamax ships expects once the Panama Canal expansion is complete. There’s more
dredging, building of terminals and rail links, roadways and tunnels leading to
the ports.
In addition, all three see the trend of the young and old
migrating to cities so they can live near work and play and learn as something
that isn’t going away soon. This means continued construction of mixed-use projects be they
residential towers with retail and restaurants on the ground floor or even more
mixed uses.
Source: SmartBlogs
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