Construction spending is up this year and is expected to
continue to increase through 2017. But, economists identified factors that
could slow construction spending.
A
bruising presidential election and a tightening labor market are prompting
reservations about future spending for nonresidential building, even as the
construction industry’s performance has staved off most gloom-and-doom
scenarios.
Total
spending for nonresidential building was up nearly 11%, to $103.3 billion, in
the first quarter. The Census Bureau estimated that the value of nonresidential
building put in place rose 3.1% in April compared to April 2015, to an
annualized $461.8 billion, spurred by robust building of hotels, offices, and
entertainment/amusement centers.
TOP CONTRACTOR GIANTS
2015
GC Revenue ($)
1. Turner Construction Co. $10,566,643,175
2. Whiting-Turner Contracting Co. $5,530,003,229
3. Fluor Corp. $5,048,920,000
4. Skanska USA $4,887,571,264
5. Gilbane Building Co. $4,406,057,000
6. PCL Construction Enterprises $4,344,294,460
7. Balfour Beatty US $3,955,770,283
8. Structure Tone $3,865,600,000
9. AECOM $3,772,057,000
10. DPR Construction $3,085,975,000
1. Turner Construction Co. $10,566,643,175
2. Whiting-Turner Contracting Co. $5,530,003,229
3. Fluor Corp. $5,048,920,000
4. Skanska USA $4,887,571,264
5. Gilbane Building Co. $4,406,057,000
6. PCL Construction Enterprises $4,344,294,460
7. Balfour Beatty US $3,955,770,283
8. Structure Tone $3,865,600,000
9. AECOM $3,772,057,000
10. DPR Construction $3,085,975,000
TOP CM/PM GIANTS
2015
CM/PM Revenue ($):
1. Hill International $503,000,000
2. Jacobs $460,670,000
3. JLL $328,233,760
4. Hunter Roberts Construction Group $259,724,915
5. AECOM $256,933,000
6. Burns & McDonnell $255,390,861
7. WSP | Parsons Brinckerhoff $173,063,000
8. Turner Construction Co. $161,788,824
9. Sachse Construction $109,836,555
10. Cumming $96,538,000
“The
construction sector is likely to be the economic tailwind” in the U.S.,
predicts Kermit Baker, PhD, Chief Economist with the American Institute of
Architects.
Baker
and chief economists Ken Simonson of the Associated General Contractors of
America and Alex Carrick of CMD Construction Data expect nonresidential
construction spending to increase 9–10% this year and 4–8% in 2017. More than
one-third of AGC’s membership expects there will be more work to bid on this
year than last year, particularly in the retail, warehouse, lodging, and office
sectors.
The
trio of economists raised a number of red flags about factors that could slow
construction spending. “Market fundamentals remain positive, but are fading in
most sectors,” said Baker.
Carrick
and Simonson are less sanguine about spending for education-related projects,
mainly because growth figures for 4- to 17-year-olds and 18- to 26-year-olds are
either flat lining or receding.
Simonson
noted that recent legislation passed by Congress extends tax credits and allows
for more federal dollars to flow into construction. But the federal government
is reducing its overall physical footprint, so it’s more likely to renovate
existing buildings than build new.
Multifamily
housing, which has been one of the construction industry’s high-powered
turbines—it’s up 30% since 2009, according to Baker—is expected to taper off to
a still-strong but normalized range of 410,000–440,000 units per year.
Simonson
also pointed out that the U.S. population has been growing at less than 1%
annually, and that several states have lost population. Immigration, which has
pushed population growth over the past few decades, has lost traction. The
factors could lead to less mobility and less demand for new construction.
HELLO!!! ARE THERE ANY CARPENTERS OUT THERE?
Another
area of concern for contractors is finding the skilled labor they need to
complete projects they bid for.
The
country’s unemployment rate stood at 4.7% in May, and was down in 269 of 387
metros, according to Bureau of Labor Statistics estimates. Carrick noted that
the labor participation rate (the labor force as a percentage of the
working-age population) fell to 62.5% in Q1/2016, from 67% in 2001.
Citing
a recent survey of 1,300 AGC-member companies, Simonson said that 79% are
having difficulty finding hourly craft professionals, and 73% struggle to hire
carpenters. More than half (56%) said they have raised their base pay for
hourly workers; 29% provide incentives and bonuses.
None
of the economists anticipates a recession rearing its head any time soon. “I
think there’s too much negative talk about the economy,” said Carrick. What
does worry him are the sluggish energy sector and economic slowdowns outside
the U.S., specifically China.
As
for the presidential race, AGC’s Simonson lamented that it might not make much
difference who wins. “I expect continued gridlock,” he says. “Uncertainty will
cause companies to hold back on major investments.”
More
on the 2016 Construction Giants: BD+C's John Caulfield examines how Turner uses to
design-build, P3, Lean practices, and engineering services.
Source: Building
Design & Construction
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