Construction spending up 20% since 2011, growth will continue, says Gilbane report

Gilbane's Ed Zarenski breaks down the U.S. construction market in new report.

Total spending of all types of construction will grow just over 7% year over yea
Total spending of all types of construction will grow just over 7% year over year from 2012 to 2013. We will start the year at an annual rate of spending near $890 billion and grow to a rate of $940 billion by year end. The ABI indicates a Q1- Q2 2013 slowdown, but then future growth. The Dodge Momentum Index, although down recently is still well up since the mid-2011 bottom indicating growth in 2013.
April 03, 2013

Gilbane Building Company today announces the publication of the Spring 2013 edition of Construction Economics – Market Conditions in Construction. Based on an array of economic data, construction starts, and material cost trends, the data is the most positive the company has seen in recent years.

“We are in a growth period that by all leading indicators seems here to stay. From 2006 to 2010, as work declined, we saw the largest decline of margins in recent history. In 2011 that trend began to reverse slightly” says Ed Zarenski, the report’s author and a 40-year veteran of the construction industry. “I expect the positive growth to continue.”

According to the report, the monthly rate of construction spending is up 20% in 24 months and increased in 18 of the last 24 months, which is a good leading indicator for new construction work in Q3-Q4 2013.

Other highlights include:

  • Residential spending will take the lead in 2013, nonresidential spending will lag.
  • Public spending will decline. Private spending will lead the charge in 2013.
  • As spending continues to increase, even moderate growth in activity will allow contractors to pass along more material costs and increase margins. When activity picks up in all sectors, escalation will begin to advance rapidly.
  • Predicted spending growth of 8.2% for Commercial markets, 5.2% for Office and 2.3% for Healthcare.

Construction jobs grew by 150,000 in the last five months. Just to meet the needs of the predicted residential building expansion, the workforce needs to grow by 750,000 jobs in the next two years, faster than the entire construction workforce has ever grown in history.

Future escalation, in order to support labor growth, materials demand and to capture increasing margins, will be higher than normal labor/material cost growth. Lagging regions may take longer to experience high escalation. Residential escalation will be near the upper end of the range.

This free report and its executive summary are available for download at http://www.gilbaneco.com/economic-report.

About Gilbane, Inc.
Gilbane provides a full slate of construction and facilities-related services – from pre-construction planning and integrated consulting capabilities to comprehensive construction management, close-out and facility management services – for clients across various markets. Marking its 140th year in operation and still a privately held, family-run company, Gilbane has more than 60 office locations around the world. To find out what the next 140 years have in store, visit www.gilbaneco.com.

         
 

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