flexiblefullpage -
billboard - default
interstitial1 - interstitial
catfish1 - bottom
Currently Reading

Construction growth looking up: Gilbane Spring 2014 Economic Report

Construction growth looking up: Gilbane Spring 2014 Economic Report

Construction spending for 2014 should finish 6.6% higher than in 2013, with nonresidential work contributing substantially.


By Gilbane | May 14, 2014
Courtesy Wikimedia Commons
Courtesy Wikimedia Commons

Gilbane has released its Spring 2014 edition of the periodic report "Construction Economics: Market Conditions in Construction" (download the full report).

Among the findings from the Executive Summary:

CONSTRUCTION GROWTH IS LOOKING UP

  • Construction Spending for 2014 will finish the year 6.6% higher than 2013. Nonresidential buildings will contribute substantially to the growth. 
  • The Architecture Billings Index (ABI) in 2013 dropped below 50 in April, November and December briefly, indicating declining workload. Overall the ABI portrays a good leading indicator for future new construction work. 
  • Selling price data for 2013 shows contractors adding to their margins.
  • Construction jobs grew by 156,000 in 2013, less than anticipated. However, hours worked also grew by 3%, the equivalent of another 150,000+ jobs. 

SOME ECONOMIC FACTORS ARE STILL NEGATIVE

  • We are experiencing a slight slowdown in construction spending that could last through May, influenced by a slight dip in nonresidential buildings and a brief flattening in residential, but more so by a steep decline in nonbuilding infrastructure spending. The monthly rate of spending for nonbuilding infrastructure may decline by 10% through Q3 2014.
  • The construction workforce and hours worked is still 22% below the 2006 peak. At peak average growth rates, it will take a minimum of five more years to return to previous peak levels. 
  •  Construction volume is 23% below peak inflation adjusted spending, which was almost constant from 2000 through 2006. At average peak growth rates of 8% per year, and factoring out inflation to get real volume growth, it will take eight more years to regain previous peak volume levels. 
  • As workload expands in the next few years, a shortage of available skilled workers may have a detrimental effect on cost, productivity and the ability to readily increase construction volume.

THE EFFECTS OF GROWTH

  • Construction spending during the first five months of 2013 declined from the rate of spending in Q4 2012. Growth has been inconsistent, even in the booming residential sector, which has seen recent declines. We see more consistent growth in 2014 for buildings. 
  • As spending continues to increase, contractors gain more ability to pass along costs and increase margins. The growth in contractor margins slowed since last year. However, expected increases in volume should reverse that in 2014.
  • ENR’s Third Quarter 2013 Cost Report shows general purpose and material cost indices increased on average about 2% to 2.5% year over year. However, selling price indices increased 4% on average. The difference between these indices is increased margins. 

IMPACT OF RECENT EVENTS

  • There are several reasons why spending is not rapidly increasing: public sector construction remains depressed as sequestration continues; the government is spending less on schools and infrastructure; lenders are just beginning to loosen lending criteria; consumers are still cautious about increasing debt load, including the consumers’ share of public debt and we may be constrained by a skilled labor shortage.
  • Supported by overall positive growth trends for year 2014, Gilbane expects margins and overall escalation to climb more rapidly than we have seen in six years.
  • Growth in nonresidential buildings and residential construction in 2014 will lead to more significant labor demand, resulting in labor shortages and productivity losses. Margins regained a positive footing in 2012 and extended those gains in 2013. Expect margins to grow stronger in 2014. When activity picks up in all sectors, escalation will begin to advance rapidly.

Click here to download the complete report and a list of data sources.

 

 

ABOUT THIS REPORT
Gilbane Inc. is a full service construction and real estate development company, composed of Gilbane Building Company and Gilbane Development Company. The company (www.gilbaneco.com) is one of the nation’s largest construction and program managers providing a full slate of facilities related services for clients in education, healthcare, life sciences, mission critical, corporate, sports and recreation, criminal justice, public and aviation markets. Gilbane has more than 50 offices worldwide, with its corporate office located in Providence, Rhode Island. The information in this report is not specific to any one region. 

Author Ed Zarenski, a 40-year construction veteran and a member of the Gilbane team for 35 years, is an estimating executive who has managed multi-million dollar project budgeting, owner capital plan cost control, value engineering and life cycle cost analysis. He compiles economic information and provides data analysis and opinion for this quarterly report. Email Zarenski at EZarenski@Gilbaneco.com.

    Related Stories

    | Aug 11, 2010

    Burt Hill, HOK top BD+C's ranking of the nation's 100 largest university design firms

    A ranking of the Top 100 University Design Firms based on Building Design+Construction's 2009 Giants 300 survey. For more Giants 300 rankings, visit http://www.BDCnetwork.com/Giants

    | Aug 11, 2010

    PBK, DLR Group among nation's largest K-12 school design firms, according to BD+C's Giants 300 report

    A ranking of the Top 75 K-12 School Design Firms based on Building Design+Construction's 2009 Giants 300 survey. For more Giants 300 rankings, visit http://www.BDCnetwork.com/Giants

    | Aug 11, 2010

    Turner Building Cost Index dips nearly 4% in second quarter 2009

    Turner Construction Company announced that the second quarter 2009 Turner Building Cost Index, which measures nonresidential building construction costs in the U.S., has decreased 3.35% from the first quarter 2009 and is 8.92% lower than its peak in the second quarter of 2008. The Turner Building Cost Index number for second quarter 2009 is 837.

    | Aug 11, 2010

    AGC unveils comprehensive plan to revive the construction industry

    The Associated General Contractors of America unveiled a new plan today designed to revive the nation’s construction industry. The plan, “Build Now for the Future: A Blueprint for Economic Growth,” is designed to reverse predictions that construction activity will continue to shrink through 2010, crippling broader economic growth.

    | Aug 11, 2010

    New AIA report on embassies: integrate security and design excellence

    The American Institute of Architects (AIA) released a new report to help the State Department design and build 21st Century embassies.

    | Aug 11, 2010

    Section Eight Design wins 2009 Open Architecture Challenge for classroom design

    Victor, Idaho-based Section Eight Design beat out seven other finalists to win the 2009 Open Architecture Challenge: Classroom, spearheaded by the Open Architecture Network. Section Eight partnered with Teton Valley Community School (TVCS) in Victor to design the classroom of the future. Currently based out of a remodeled house, students at Teton Valley Community School are now one step closer to getting a real classroom.

    boombox1 - default
    boombox2 -
    native1 -

    More In Category

    Mass Timber

    Charlotte's new multifamily mid-rise will feature exposed mass timber

    Construction recently kicked off for Oxbow, a multifamily community in Charlotte’s The Mill District. The $97.8 million project, consisting of 389 rental units and 14,300 sf of commercial space, sits on 4.3 acres that formerly housed four commercial buildings. The street-level retail is designed for boutiques, coffee shops, and other neighborhood services.


    Construction Costs

    New download: BD+C's May 2024 Market Intelligence Report

    Building Design+Construction's monthly Market Intelligence Report offers a snapshot of the health of the U.S. building construction industry, including the commercial, multifamily, institutional, and industrial building sectors. This report tracks the latest metrics related to construction spending, demand for design services, contractor backlogs, and material price trends.



    halfpage1 -

    Most Popular Content

    1. 2021 Giants 400 Report
    2. Top 150 Architecture Firms for 2019
    3. 13 projects that represent the future of affordable housing
    4. Sagrada Familia completion date pushed back due to coronavirus
    5. Top 160 Architecture Firms 2021