May 3, 2013

More positive momentum for architecture billings

AIAThe latest Architecture Billings Index (ABI) shows a steady upturn in design activity.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.  The American Institute of Architects (AIA) reported the March ABI score was 51.9, down from a mark of 54.9 in February.  This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings).  The new projects inquiry index was 60.1, down from the reading of 64.8 the previous month.

“Business conditions in the construction industry have generally been improving over the last several months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “But as we have continued to report, the recovery has been uneven across the major construction sectors so it’s not a big surprise that there was some easing in the pace of growth in March compared to previous months.”

Key March ABI highlights:

  • Regional averages: Northeast (54.6), Midwest (53.9), South (53.6),  West (51.9)
  • Sector index breakdown: multi-family residential (56.9), commercial / industrial (53.5),  mixed practice (53.3), institutional (50.6)
  • Project inquiries index: 60.1
  • The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.
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May 1, 2013

Construction employment increases in 30 states

Associated General Contractors of AmericaConstruction employment rose in 30 states in March as the industry expanded, although at a slower pace than in February, according to an analysis by the Associated General Contractors of America of Labor Department data. Construction employment nationwide rose for the 10th consecutive month in March, by 18,000, following an increase of 49,000 in February.

According to Ken Simonson, the association’s chief economist, residential and private nonresidential construction is expanding, but investment in infrastructure and public buildings is still on a downward path. This affects employment in states with a large federal presence.  Those states remain vulnerable to construction cutbacks from newly enacted and proposed decreases in federal funding for infrastructure.

Simonson noted that hiring for recovery work from Hurricane Sandy may be the reason New York had the largest increase in construction employment between February and March (6,000 jobs, 1.9 percent) and Connecticut had the largest percentage increase (5.7 percent, 2,900 jobs). Florida added the second-largest number of construction jobs for the month (5,500, 1.6 percent), while Arkansas was second in percentage increase (4.5 percent, 2,000 jobs).

Twenty states and the District of Columbia lost construction jobs between February and March. The largest losses occurred in Missouri (-3,400 jobs, -3.2 percent). Ohio had the second-highest loss of jobs (-3,300, -1.9 percent), followed by Michigan, which had the second-highest percentage decline (-2.4 percent, -3,100 jobs).

Simonson reported that 31 states and D.C. added construction jobs from March 2012 to March 2013 and 19 states lost workers. Alaska led all jurisdictions in the percentage of new construction jobs (11.4 percent, 1,900 jobs); followed by Hawaii (10.7 percent, 3,100 jobs); Utah (8.7 percent, 6,000 jobs) and Louisiana (8.6 percent, 10,700 jobs). California added the most new construction jobs over the past 12 months (41,000, 7.1 percent), followed by Texas (39,800 jobs, 6.9 percent).

Among the 19 states losing construction jobs during the past year, Rhode Island lost the highest percentage (-9.6 percent, -1,600 jobs); followed by Montana (-8.1 percent, -1,900 jobs) and South Dakota (-7.7 percent, -1,700 jobs). Ohio lost the most jobs (-9,500 jobs, -5.2 percent); followed by Illinois (-8,500 jobs, -4.4 percent) and North Carolina (-5,300 jobs, -3.0 percent).

Association officials said the cuts in federal funding for construction enacted in March would push employment totals lower in states with large military and federal civilian facilities. They urged policy makers to make infrastructure investment a priority even while cutting other categories of federal spending to bring down deficits.

View the state employment data by rank and by state.

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April 12, 2013

Construction spending rebounds in February

Associated General Contractors of AmericaConstruction spending rebounded in February with gains from depressed January levels in residential, private nonresidential and public investment, according to an analysis of new Census Bureau data by the Associated General Contractors of America. Association officials cautioned that the rise in public investment was likely to be short-lived and urged policy makers in Washington to make infrastructure investment a priority.

Construction put in place totaled $885 billion in February, up 1.2 percent from the downwardly revised January level. The February 2013 total was 7.9 percent higher than in February 2012. Private residential construction jumped 2.2 percent for the month and 20 percent year-over-year. Private nonresidential spending rose 0.4 percent for the month and 6.1 percent year-over-year. Public construction spending increased 0.9 percent for the month but slipped 1.5 percent over 12 months.

New single-family construction rose 4.3 percent from January’s level and 34 percent from a year ago. New multifamily construction fell 2.2 percent for the month but was 52 percent above the February 2012 mark.

The largest private nonresidential category, power construction—which includes oil and gas fields and pipelines as well as power plants, alternative energy and transmission lines—increased 0.7 percent for the month and 4.0 percent over 12 months. Manufacturing construction rose 0.3 percent and 9.9 percent, respectively. Private transportation construction slumped 2.4 percent in February but climbed 17 percent year-over-year. Warehouse construction soared 8.3 percent and 19 percent. New and remodeled private office construction rose 0.3 percent and 25 percent.

Association officials said federal infrastructure investment has been plunging even as several states have passed funding increases for projects. Federal investment in construction dropped 1.1 percent in February and 10 percent from a year ago, while state and local investment rose 1.1 percent for the month and was nearly level—down 0.5 percent—year-over-year. They urged the federal government to fund vitally needed investments in infrastructure projects.

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March 22, 2013

Economic indicators on the rise

AIAWith increasing demand for design services, the Architecture Billings Index (ABI) is continuing to strengthen. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 54.9, up slightly from a mark of 54.2 in January. This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 64.8, higher than the reading of 63.2 the previous month – and its highest mark since January 2007.

Key February ABI highlights:

  • Regional averages: Northeast (56.7), Midwest (54.7), West (54.7), South (52.7)
  • Sector index breakdown: multi-family residential (60.9), mixed practice (56.9), commercial / industrial (53.3), institutional (50.7)
  • Project inquiries index: 64.8

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Construction employment also on the rise
Associated General Contractors of AmericaThat’s not the only good news. According to data just released by the Associated General Contractors of America, construction employment increased in 145 out of 339 metropolitan areas between January 2012 and January 2013, declined in 141 and was stagnant in 53 metro areas. Association officials noted that after years of declining construction employment contractors in some metro areas are beginning to worry about the availability of skilled workers now that they have resumed hiring.

Pascagoula, Miss. added the highest percentage of new construction jobs (45 percent, 1,500 jobs) followed by Brownsville-Harlingen, Texas (19 percent, 600 jobs); Cheyenne, Wyo. (19 percent, 500 jobs) and Haverhill-North Andover-Amesbury, Mass.-N.H. (18 percent, 600 jobs). Dallas-Plano-Irving, Texas (10,100 jobs, 10 percent) added the most jobs. Other areas adding a large number of jobs included Los Angeles-Long Beach-Glendale, Calif. (9,600 jobs, 9 percent); Houston-Sugar Land-Baytown, Texas (8,700 jobs, 5 percent) and Phoenix-Mesa-Glendale, Ariz. (6,000 jobs, 7 percent).

The largest job losses were in Chicago-Joliet-Naperville, Ill. (-3,500 jobs, -3 percent) and Detroit-Livonia-Dearborn, Mich. (-3,500 jobs, -19 percent); followed by Northern Virginia (-3,200 jobs, -5 percent); and Charleston, W.V. (-2,900 jobs, -20 percent). Charleston, W.V. lost the highest percentage. Other areas experiencing large percentage declines in construction employment included Atlantic City-Hammonton, N.J. (-19 percent, -1,000 jobs); Detroit-Livonia-Dearborn, Mich.; Kankakee-Bradley, Ill. (-18 percent, -200 jobs) and Akron, Ohio (-17 percent, -1,800 jobs).

Association officials noted that after years of declining construction employment, many former construction workers have left for other industries or retired. They added that the industry’s dire conditions have deterred many graduates from pursuing careers in construction and as a result, the industry is likely to face a shortage of available skilled workers in some parts of the country if the industry continues to add jobs.

View construction employment figures by state and rank.

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March 13, 2013

Architecture Billings Index Surges

AIAAs the prognosis for the design and construction industry continues to improve, the Architecture Billings Index (ABI) is reflecting its strongest growth since November 2007.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.  The American Institute of Architects (AIA) reported the January ABI score was 54.2, up sharply from a mark of 51.2 in December. (Every January the AIA research department updates the seasonal factors used to calculate the ABI, resulting in a revision of recent ABI values.)

This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings).  The new projects inquiry index was 63.2, much higher than the reading of 57.9 the previous month.

Key January ABI highlights:

  • Regional averages: Midwest (54.4), West (53.4), South (51.7),  Northeast (50.3)
  • Sector index breakdown: mixed practice (54.9), multi-family residential (54.5), commercial / industrial (52.0), institutional (50.2)
  • Project inquiries index: 63.2

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

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February 12, 2013

Construction employment increases in 139 out of 337 metro areas

Associated General Contractors of AmericaConstruction employment increased in 139 out of 337 metropolitan areas between December 2011 and December 2012, declined in 131 and was stagnant in 65, according to a new analysis of federal employment data released today by the Associated General Contractors of America. Association officials noted that growing private sector demand for new construction projects boosted employment in a slight plurality of metro areas.

Pascagoula, Miss. added the highest percentage of new construction jobs (42 percent, 1,900 jobs) followed by Haverhill-North Andover-Amesbury, Mass.-N.H. (22 percent, 800 jobs); Lafayette, La. (17 percent, 1,100 jobs) and Omaha-Council Bluffs, Neb.-Iowa (16 percent, 3,000 jobs). Houston-Sugar Land-Baytown, Texas (17,600 jobs, 10 percent) added the most jobs. Other areas adding a large number of jobs included Dallas-Plano-Irving, Texas (8,300 jobs, 8 percent); Seattle-Bellevue-Everett, Wash. (7,800 jobs, 12 percent); Boston-Cambridge-Quincy, Mass. (5,900 jobs, 12 percent) and Los Angeles-Long Beach-Glendale, Calif. (5,700 jobs, 5 percent).

The largest job losses were in Atlanta-Sandy Springs-Marietta, Ga. (-4,900 jobs, -5 percent); followed by Portland-Vancouver-Hillsboro, Ore.-Wash. (-3,600 jobs, -7 percent); Tampa-St. Petersburg-Clearwater, Fla. (-3,500 jobs, -7 percent) and Northern Virginia (-3,200 jobs, -5 percent). Jackson, Miss. (-20 percent, -2,000 jobs) lost the highest percentage. Other areas experiencing large percentage declines in construction employment included Columbus, Ind. (-19 percent, -300 jobs); Springfield, Mass.-Conn. (-18 percent, -1,400 jobs) and Danville, Ill. (-13 percent, -100 jobs).

Association officials noted that construction employment is benefitting from growing demand for construction, driven primarily by the private sector. They added that the rebounding housing market and relatively strong demand for health care, energy and higher education facilities boosted construction spending levels by over 7 percent for the year through November. But they cautioned that construction spending was still more than $300 billion below peak levels amid declining public sector activity and weaker demand for office, retail and lodging.

View construction employment figures by state and rank.

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January 29, 2013

Outlook for construction improve for 2013

Associated General Contractors of AmericaSignificantly more construction firms are planning to add new staff than plan to cut staff while demand for many types of private sector construction projects should increase this year according to survey results released recently by the Associated General Contractors of America and Computer Guidance Corporation. The survey, conducted as part of Tentative Signs of a Recovery: The 2013 Construction Industry Hiring and Business Outlook, provides a generally optimistic outlook for the year even as firms worry about rising costs and declining public sector demand for construction.

Stephen E. Sandherr, the association’s chief executive officer noted that significantly more firms are planning to add staff this year compared to the number of firms expecting to make layoffs. He said that 31 percent of firms plan to add staff this year, while only 9 percent plan to make layoffs this year. The scope of those staff additions are likely to be modest, however, with 79 percent of firms reporting they plan to hire 15 or fewer people in 2013 and only 13 percent planning to hire more than 25 new workers this year.

Among the 30 states with large enough survey sample sizes, 56 percent of firms in Maryland plan to hire new staff this year, more than in any other state. Only 14 percent of firms in South Carolina plan to add staff this year, the least amount in any state. Meanwhile, 37 percent of firms in Michigan plan layoffs for this year, the highest percentage of any state. No firms working in Maryland reported plans to make layoffs this year. (Click here for state-by-state survey results.)

Contractors appear increasingly optimistic that demand for certain private sector projects will expand this year, Sandherr noted. Firms are most optimistic about the outlook for hospital and higher education construction, he said, noting that 36 percent of firms predict the amount of money spent on those projects will grow in 2013 while 39 percent of firms expect the market will remain stable compared to last year. Contractors were also optimistic about the markets for power construction, but had lower expectations for manufacturing; private office and retail, warehouse and lodging construction.

Meanwhile, contractors expect demand for many types of public construction will decline in 2013. For example, 40 percent of contractors report they expect demand for public buildings to shrink in 2013 while only 18 percent expect that market to grow. Another 37 percent of contractors report they expect demand for K-12 school construction to shrink while only 20 percent expect it to increase. And 35 percent of contractors expect the market for manufacturing facilities to shrink this year, while only 23 percent predict it will expand.

A significant – but smaller than last year – number of contractors report that customers’ projects have been delayed or cancelled because of tight credit conditions. Forty percent of responding firms report that tighter lending conditions have forced their customers to delay or cancel construction projects. Only 3 percent of firms reported having an easier time getting credit while 41 percent report no change in credit conditions.

Overall demand for new construction equipment is likely to remain modest in 2013. Sixty-four percent of firms plan to purchase new equipment this year, down from 70 percent last year, while 77 percent of firms plan to lease this year compared to 78 percent in 2012. Contractors are increasingly relying on leasing equipment to avoid having to pay for idle equipment during lags in construction activity, the economist noted. Even as they shift toward more leasing, firms’ appetite for new equipment remains modest, with two-thirds of the firms planning to buy and 73 percent planning to lease $250,000 or less in equipment this year.

Contractors also report being squeezed by rising costs for health insurance and construction materials. Seventy-five percent of firms reported paying more for health care coverage in 2012 and 77 percent expect to pay even more in 2013. Meanwhile, 88 percent of firms reported paying more for construction materials last year while 90 percent expect to pay more for their supplies this year. However, contractors are increasingly optimistic about their ability to raise bid levels. Twenty-eight percent of firms expect to increase the amount they charge for construction this year, nearly double the 15 percent of firms that increased prices in 2012.

An increasing number of construction firms – 38 percent in 2012 compared to 35 percent in 2011 – report using Building Information Modeling services, also known as BIM, association officials noted. And 43 percent report they expect the use of BIM to increase in 2013. In addition, more firms report working on public private partnerships, which leverage private-sector dollars to finance public projects. Thirty-seven percent of firms report being involved in these kinds of projects in 2012 and 97 percent expect demand for these kinds of privately financed projects to increase or remain stable in 2013.

60 percent of firms report they plan to invest in their information technology departments in 2013. He added that 73 percent of those firms report they expect to invest over $10,000 in new information technology this year. However, a relatively small percentage of firms – 11 percent – report they plan to purchase new financial and job cost software in 2013, Kirk added. Similarly, only 9 percent of firms plan to lease or finance the purchase of new financial and job cost software in 2013.

The outlook, which the association co-sponsored with Computer Guidance, was based on survey results from over 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico. Contractors from every segment of the industry answered over 30 questions about their hiring, equipment purchasing and business plans. Economists and specialists from the association and Computer Guidance analyzed those comments to craft the outlook. View Tentative Signs of a Recovery: The 2013 Construction Hiring and Business Outlook Report. View the survey results.

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January 18, 2013

Dodge Momentum Index Rebounds in December

The Dodge Momentum Index rose 3.2% in December, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

The December gain brought the Momentum Index to 94.9 (2000=100), up from November’s revised 91.9. After showing a hesitant upward trend during the first seven months of 2012, the Momentum Index settled back from August through October, and then stabilized in November. This coincided with the economic and political uncertainty that dampened investment during that time. The December rebound for the Momentum Index brings it back close to the 95.4 reached in July, which was the highest reading reported during 2012. The latest month’s upturn may also be the initial sign that the uncertainty that restrained plans for construction is now easing, with the November 2012 elections now final and the fiscal cliff being averted for the time being.

Dodge Momentum Index - December 2012

December’s increase for the Momentum Index was due entirely to a pickup by its commercial building segment, which advanced an impressive 9.0% relative to November. New plans for stores and office buildings were stronger in December, and several notable warehouse developments also bolstered the Index, including plans for two new Amazon distribution facilities in Dupont WA and Fort Worth TX. In contrast, the institutional building segment of the Momentum Index dropped 2.4% in December, weighed down by a reduction in the number of new hospitals entering the planning phase. The retreat for the institutional building segment is likely to continue for a while longer, given expected cutbacks in federal spending and state budget constraints.

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January 7, 2013

Architecture Billings Index Signals Gains for Fourth Straight Month

AIAThe latest Architecture Billings Index (ABI) shows that billings at architecture firms across the country continue to increase. The American Institute of Architects (AIA) reported the November ABI score was 53.2, up from the mark of 52.8 in October. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.6, up slightly from the 59.4 mark of the previous month.

Key November ABI highlights

  • Regional averages:
    • Northeast (56.3)
    • Midwest (54.4)
    • South (51.1)
    • West (49.6)
  • Sector index breakdown:
    • multi-family residential (55.9)
    • mixed practice (53.9)
    • commercial/industrial (52.0)
    • institutional (50.5)
  • Project inquiries index: 59.6

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

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November 16, 2012

Dodge Outlook Report predicts modest growth

McGraw-Hill ConstructionMcGraw-Hill’s 2013 Dodge Construction Outlook predicts that total U.S. construction starts for 2013 will rise 6% to $483.7 billion, slightly higher than the 5% increase to $458 billion estimated for 2012. Based on significant research and in-depth analysis of macro-trends, the 2013 Dodge Construction Outlook details the forecasts for each construction sector:

  • Single family housing will grow 24% in dollars, corresponding to a 21% increase in units to 615,000 (McGraw-Hill Construction basis). The positives for single family housing have become more numerous – the pace of foreclosures has eased, home prices are stabilizing, and mortgage rates are at record lows.
  • Multifamily housing will rise 16% in dollars and 14% in units, marking healthy percentage gains yet slower growth than what took place during 2011 and 2012. Improved market fundamentals will help to justify new construction, and this structure type continues to be viewed favorably by the real estate finance community.
  • Commercial building will increase 12%, a slightly faster pace than the 5% gain estimated for 2012. Both warehouses and hotels will benefit from lower vacancy rates, while store construction will feature more upgrades to existing space and the derived lift coming from gains for single family housing. The increase for office construction will be modest, as new privately financed projects continue to be scrutinized carefully by lenders. Next year’s level of commercial building in current dollars will still be more than 40% below the 2007 peak.
  • Institutional building will level off, following the steep 13% drop estimated for 2012. For educational facilities, K-12 construction will slip further while college and university construction should at least stabilize. Healthcare facilities are expected to make a modest rebound after this year’s downturn.
  • The manufacturing building category will grow 8%, showing improvement after its 2012 decline.
  • Public works construction will slide an additional 1%, as federal spending cuts in particular restrain environmental projects. The new two-year federal transportation bill should help to limit the impact of spending cuts on highways and bridges.
  • Electric utility construction will drop 31%, after reaching a record high in current dollars during 2012. This year was boosted by the start of two very large nuclear power plants, and projects of similar magnitude are not expected for 2013. The expiration of federal loan guarantees for renewable energy projects would also dampen construction in 2013.

The 2013 Dodge Construction Outlook was presented at McGraw-Hill Construction’s 74th annual Outlook Executive Conference in Washington, D.C. Copies of the report with additional details by building sector can be ordered online.

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