Survey Finds Construction Firms Plan to Hire in 2011

According to an industry-wide survey by the Associated General Contractors of America and Navigant, more construction firms will be hiring workers in 2011 than laying them off. The survey, conducted as part of the Construction Industry Hiring and Business Outlook, shows the industry may finally be emerging from a severe downturn that has left millions of skilled workers unemployed.

The survey reports that 27 percent of construction firms say that they plan to add staff in 2011, while only 20 percent plan layoffs. In 2010, 55% of construction firms laid off employees, while only 20% added them. Expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of only 16 employees. Firms in Iowa are the most optimistic, with 45% planning to hire, while Idaho is the most pessimistic. There, 48% of the firms are planning cutbacks.

Among the 26 states with large enough survey sample sizes, 45 percent of firms in Iowa plan to hire, more than in any other state. Those firms plan to hire an average of 5 employees each, 21 percent of their workforce. Only five percent of Iowa firms plan layoffs. Meanwhile, 48 percent of firms in Idaho plan layoffs for this year, the highest percentage of any state. Those firms plan to lay off an average of 12 employees each, 11 percent of their workforce. Only 14 percent of Idaho firms plan to hire.

View the 2011 Construction Hiring and Business Outlook report.

View the survey results.

Architecture Billings Index Reaches Highest Score Since 2007

After falling in October, the Architecture Billings Index (ABI) rose more than three points in November to reach its highest mark since December 2007. The American Institute of Architects (AIA) reported the November ABI score was 52.0, up from a reading of 48.7 the previous month. 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 61.4, down slightly from a mark of 61.7 in October.

Key November ABI highlights:
Regional averages: Northeast (51.1), Midwest (50.9), South (50.5), West (48.7)
Sector index breakdown: multi-family residential (54.3), commercial / industrial (49.8), institutional (49.3), mixed practice (45.8)

The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction spending activity. More information on the ABI and the analysis of its relationship to construction activity can be found in the white paper, “Architecture Billings as a Leading Indicator of Construction: Analysis of the Relationship Between a Billings Index and Construction Spending.”

Report Predicts Construction Market to Increase 8% in 2011

McGraw-Hill Construction recently released its 2011 Construction Outlook, which predicts an increase in overall U.S. construction starts for next year. The level of construction starts in 2011 is expected to advance 8% to $445.5 billion, following the 2% decline predicted for 2010.

The 2011 Construction Outlook details the forecasts for each construction sector, as follows:

  • Single family housing in 2011 will climb 27% in dollars, corresponding to a 25% increase in the number of units to 565,000 (McGraw-Hill Construction basis).
  • Multifamily housing will rise 24% in dollars and 23% in units, continuing to move gradually upward.
  • Commercial buildings will increase 16%, following a three-year decline, which dropped contracting 62% in dollar terms. The levels of activity expected for stores, warehouses, offices and hotels in 2011 will still be quite weak by historical standards.
  • The institutional building market will slip an additional 1% in 2011, retreating for the third straight year. The difficult fiscal climate for states and localities will continue to dampen school construction, although the healthcare facilities category should see moderate growth.
  • Manufacturing buildings will increase 9% in dollars and 11% in square feet.
  • Public works construction will drop 1%, given the fading benefits of the federal stimulus act for highway and bridge construction.
  • Electric utilities will slide 10%, falling for the third year in a row.

The complete report costs $495, with a 25% discount for members of trade and professional groups.

Architecture Billings Index is Positive for First Time in More Than Two Years

Architecture Billings IndexFor the first time since January 2008, the Architecture Billings Index (ABI) indicated a growth in design activity in September, increasing for the fourth straight month. 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 September ABI score was 50.4, up from a reading of 48.2 the previous month. 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 also up sharply, moving from 54.6 to 62.3 – the highest mark since July 2007.

Other September ABI highlights include:

  • Regional averages: Northeast (56.7), Midwest (51.0), South (47.0), West (44.5).
  • Sector index breakdown: commercial / industrial (56.3), institutional (47.9), multi-family residential (47.0), mixed practice (44.2).
  • Project inquiries index: 62.3.

“This is certainly encouraging news, but we will need to see consistent improvement over the next few months in order to feel comfortable about the state of the design and construction industry,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “While there has been increasing demand for design services, it is happening at a slow rate and there continue to be other obstacles that are preventing a more accelerated recovery. Still, the strong upturn in design activity in the commercial and industrial sector certainly suggests that this upturn can possibly be sustained.”

McGraw-Hill Report Shows That Europeans Have Been Using BIM Longer, But Adoption is Greater in North America

BIM in EuropeA little over a third (36%) of Western European construction professionals are now using Building Information Modeling (BIM), according to McGraw-Hill Construction’s latest SmartMarket Report, The Business Value of BIM in Europe.

Produced in collaboration with Autodesk, the National Institute of Building Sciences/buildingSMART alliance, and 11 industry associations in Europe, and released today, the first-ever report compares BIM adoption rates in France, Germany and the U.K. with those in North America, where 49% of contractors, architects and engineers report BIM usage, according to McGraw-Hill Construction’s 2009 report, The Business Value of BIM.

McGraw-Hill Construction’s new report reveals meaningful differences between the North American and European BIM markets and further affirms that firms with greater experience and expertise in BIM frequently achieve a significant return on their BIM investment. Over a third of Western European BIM users (34%) have more than five years of experience using BIM, versus only 18% in North America; and nearly three-quarters of Western European BIM users (74%) report a positive perceived return on their overall investment in BIM, compared with 63% of North American BIM users.

Users in Western Europe and North America agree that interoperability of software used by team members is an important factor in determining BIM’s overall value on construction projects. To download the free report, visit McGraw-Hill Construction website.

Total Construction Spending Up 0.4%, But Private Spending Down

Total construction spending edged up 0.4 percent between July and August to $812 billion, driven by increases in public construction activity including stimulus and base realignment projects, according to an analysis of new Census Bureau data released today by the Associated General Contractors of America. Association officials cautioned, however, that private residential and nonresidential spending both continued to shrink as private-sector demand for construction remains extremely weak.

“Federal investments from the stimulus and other programs are protecting some construction workers from a devastating downturn in private construction activity,” said Ken Simonson, the association’s chief economist. “But the industry will continue to be at risk of greater economic hardships as long as private demand for construction continues to shrink.” Private residential construction dropped 1.7 percent during the past year while private nonresidential spending dropped 24 percent, Simonson noted.

The economist added that all 11 categories of private nonresidential construction in the Census Bureau’s press release had declined from a year earlier, most by double-digit percentages. Even private power construction, which was doing well earlier this year, fell 2.9 percent from July in seasonally adjusted terms and 15.5 percent year-over-year. Simonson added that single-family construction is up 4.2 percent year-over-year but has been dropping since April, and that multi-family construction is down a “devastating” 52 percent over the past 12 months.

While public construction spending increased by 2.5 percent between July and August, it is still down 1.0 percent from August 2009 to August 2010, driven largely by declines in state and local tax revenue, Simonson noted. Stimulus funds appear to have lifted public housing (up 33 percent from August 2009 to August 2010), sewage and waste disposal (up 19 percent), water supply construction (up 5.2 percent) and highway and street construction (up 0.9 percent), Simonson observed. Reconstruction work around New Orleans helped conservation spending rise 18 percent, the economist also suggested.

In contrast, public educational construction, which is almost entirely funded from state and local revenues, slumped 13 percent. Stephen Sandherr, chief executive officer of the construction association, said the new spending data show that stimulus funds for construction have been turning into projects at an increasing rate. But he cautioned that temporary investment measures like the stimulus were likely to expire before private sector investments increase. “Without action soon on long-term infrastructure programs like the highway and transit bill, our industry faces the severe risk of tumbling into another downturn,” Sandherr said.

Latest reports suggest business stability, growth?

Two industry economics reports are indicating that the commercial-construction business may be stabilizing and that growth may be on the horizon. While there are still several negative influences in place (credit, demand, economic uncertainty), the positive influences seem to be gaining ground.
   The latest Architecture Billings Index (ABI), from the American Institute of Architects, Washington, indicates a negligible increase from May to June. The index reflects the approximate 9-to-12-month lag time between architecture billings and construction spending. The June ABI rating was 46.0, up slightly from a reading of 45.8 in May. The new-projects-inquiry index increased from 55.5 to 57.7.
   “The steep decline in nonresidential property values has slowed investment in new facilities,” said AIA chief economist Kermit Baker, PhD, Hon. AIA. “Conditions at architecture firms continue to remain very soft, but we’re optimistic that they will improve before the end of the year.”
   Even more positive is the July report from Reed Construction Data, Norcross, GA. That report indicates that non-residential construction starts through June are 13% higher than the same 2009 time period and 3% more than in May 2010. According to the report, the numbers indicate that construction has been relatively steady for the past four months. The numbers also tell us that construction starts are 46% greater than the low point in June 2010, but 25% less than the pre-recession peak. Reed also expects construction starts to remain steady in the coming months and then rise at the end of the year.
   Comparing January through June 2009 numbers with the same time period this year, Reed shows construction-start improvement in government office (30.1%), laboratory (12.3%), religious (8.7%), hospital/clinic (14.7%), police/courthouse/prison (45.7%), and school/college (12%). A real standout is military facilities, which showed a 203.7% growth.—Gary L. Parr

Jobs finally join the burgeoning economy

In the past couple of months the economy has been moving from a mixed-bag of news to primarily positive reports. The millstone has always been continued deterioration in the job market.
   Finally, with today’s announcement, the job market seems to be showing signs of a turnaround. According to a report, in November, the unemployment rate showed the largest decline in more than three years. Only 11,000 jobs were lost in November. Experts were expecting 125,000. September and October job losses were also adjusted down, resulting in a three-month positive trend.
   This comes on the heels of the most-recent Architecture Billings Index, as reported in the November issue of CBP’s E-Newsletter. The October index of 46.1 was the highest mark since August 2008 and a notable increase from the 43.1 September number. The new-projects inquiry score remained strongly in the growth category at 58.5.
   We all know that the job market is still rather lousy and the Architecture Billings Index, though improving, is still showing a declining market. But, as we reach the end of a very difficult year, it’s encouraging to see these key numbers heading north instead of south.—Gary L. Parr

Construction economics still a mixed bag

The construction outlook bag remains mixed, but the contents are looking more positive, particularly for 2010. I’ll just tell you what the latest reports are saying and you can interpret for yourselves.—Gary L. Parr

  • The September Architecture Billings Index, from AIA, Washington, was 43.1, a slight increase from the 41.7 August number. However, the new-projects inquiry score was 59.1, the highest level since Sept. 2007. “The fact that inquires for new project are so high is an encouraging sign that we may be seeing new construction activity entering the design phase,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “But that optimism has to be tempered by the fact that the marketplace is so competitive that firms are broadening their search for new projects, thereby inflating the number of inquiries that they are reporting. However, some larger stimulus-funded building activity should be coming online over the next several months, partially offsetting the steep decline in private commercial construction.”
  • According to the Assn. of General Contractors of America, Arlington, VA, Sept. construction employment declined in all but one state, compared with 2008. The number of states gaining construction jobs, from Aug. to Sept. 2009, also declined after increasing in June and July. “While there’s little doubt construction employment would have been worse without the stimulus, there’s no question that the industry continues to shed jobs at an alarming rate,” said Ken Simonson, chief economist for the association. “The stimulus remains an important measure, but until private-sector demand for construction resumes, there’s little chance the current construction employment decline will turn around or even stop.”
  • According to Reed Construction Data, Norcross, GA, the drop in construction materials prices is essentially over. Prices fell 7.5% from Sept. 2008 to August 2009, and prices have been essentially steady for the past three months. Prices are not expected to change in the next six months and, if they do, it will be with a slight upward trend. According to the report, “a slight upward trend in prices is expected through the winter because of expected international economic developments. Asian economies are recovering faster than the U.S. Chinese economic growth has already returned to about an 8% annual rate. This rising demand for construction commodities and manufactured materials will pressure U.S. construction materials prices up, in spite of the slack U.S. economy.”
  • Also, according to Reed Construction Data, economic recovery in mid-2009 will lead to construction recovery in early 2010. According to Reed economist, Jim Haughey, “the turnabout to growth in the overall economy last summer started changes in the economic environment that will lead to resumed growth in construction activity during the winter quarter. Single-family housing led the recovery, as it often does, with an initial burst of growth late in the spring that was a major contributor to the growth in GDP last summer. The balance of construction will begin to recover, market by market, a few months ahead. Retail construction will be one of the first markets to recover because it was one of the first markets to collapse. But recovery will be much delayed for manufacturing and power construction where energy-driven projects keep construction spending growing well in 2009. The enabling changes in the construction economic environment, underway in the last half of 2009, include gains in buyer confidence, both consumer and business, declining interest rate spreads for less than prime borrowers, reduction in surplus inventory, including homes for sale and empty nonresidential space and a significant improvement in export sales to a newly expanding world economy, especially in Asia.”

AIA misses chance to tell positive construction forecast story

The American Institute of Architects, Washington, missed an opportunity Monday to shine a bright light on the non-residential construction market. A press release from that august organization, describing its semi-annual Consensus Construction Forecast,was titled “Significant Downturn in Nonresidential Construction Activity Projected through 2010.” I read that headline and my first thought was “how can 2010 possibly be worse than 2009?”
   Then I read in the first line of the release, “nonresidential construction spending is expected to decrease by 16 percent in 2009 and drop by another almost 12 percent in 2010 in inflation adjusted terms.”  That made me scratch my head a bit because that seemed like progress to me. So I jumped to the numbers. They also said progress:

  • Retail: -28% in 2009, -12.6% in 2010
  • Hotels: -25.8% in 2009, -16.8% in 2010
  • Office buildings: -21.5% in 2009, -17.3% in 2010
  • Education: -8.2% in 2009, -0.7% in 2010
  • Healthcare: -1.5% in 2009, -0.8% in 2010

   Maybe it’s just my optimistic view, but these numbers are telling me that the falloff in construction activity is slowing significantly and healthcare (0.8%) and education (0.7%) are basically projected to break even. Many people would consider that to be a victory. I was surprised and very encouraged to see that the drop in retail construction will be less than half of the 2009 number. I didn’t think we’d see retail progress of any kind for a couple of years.
   I doubt there is anyone who expects commercial construction to go from a significant slowdown to growth just because the calendar date changes. It’s going to take time for things to get back on the positive side, but this forecast tells me things are heading in the right direction. I also doubt that this forecast does a very good job of representing the extensive amount of remodeling/retrofitting work that is going on to make existing buildings more energy efficient/greener.
   In my mind, this forecast is good news, not another black cloud of disaster, and the AIA blew its first chance in a long time to make a positive statement.—Gary L. Parr