Four of the Most Important Commercial Construction Reports Recently Released
Reports on the commercial construction industry often get lumped in with residential data and ultimately forgotten, as focus tends to be on the housing market. Despite this often connected nature about the overall industry, commercial construction is a completely different beast from residential.
Although the commercial sector differs greatly from residential, the April reports showed a similar trend of mixed outlooks, but may skew slightly towards the positive side. Here is a look at 4 of the most significant commercial construction reports released in April.
1. Fed’s Beige Book: Commercial and Industrial Construction Improve
The Federal Reserve offered a sunny start to the month with its Current Economic Conditions report, also known as the Beige Book, released on April 15. Data showed commercial activity was stable or slightly improving in February and March. The cities with the strongest improvements in office building and industrial construction were: Boston, New York, Philadelphia, Chicago, Minneapolis, Dallas, and San Francisco. Boston experienced a significant jump in demand for commercial properties and saw a slight gain in commercial construction speculative activity, according to the report.
The cities cited in the report noted their economies improved in tandem with the improving commercial sectors. Certainly, as a city’s economy improves, demand for office and retail space will follow suit. The Fed’s report showed strength in the commercial sector in major cities across the country at a time when residential construction was still floundering.
2. Associated General Contractors of America’s Employment Report:
Construction Employment Dips
A report from the Associated General Contractors (AGC) of America on April 21 made that optimism fleeting, as only 19 states added construction jobs between February and March. The number was a dramatic fall from the previous month, when 33 states added jobs.
The AGC attributed the employment slowdown to Congress’s inaction. The association said transportation projects and other infrastructure construction would significantly strengthen the job market, but Congress has yet to pass the necessary legislation to make it happen.
Another reason for the decline: state economies with dependence on the oil industry are suffering. In fact, Texas lost the highest number of construction jobs between February and March, at 5,800, the AGC reported.
Construction employment numbers offer insight into both the residential and commercial construction sectors, but commercial projects often provide jobs at a much larger scale. With fewer big infrastructure projects, and a lack of demand in oil-rich states, employers may have no choice but to cut their staffs. The weaker the job market for construction workers, the worse off commercial construction is likely to be.
3. Dodge Data & Analytics Report: Construction Starts Down
A more lukewarm report came from a Dodge Data & Analytics report released on April 21, announcing construction starts had fallen 13% in March. During the previous 2 months, major groundbreakings had occurred at liquefied natural gas (LNG) projects, a petrochemical plant, and a solar power facility—each worth more than $1 billion—which led to an uncommonly high number of starts. March did not have as many big-budget items, except for groundbreaking on a $2.3 billion highway project in Florida, according to the report. Dodge Data also noted that institutional building dropped 9% in March after its 20% jump in February.
The report was more of a neutral offering, as the drop in construction starts was less of a major decrease and more of a step towards getting the numbers back to normal. The major project starts during the previous month artificially boosted the stats to unreachable levels. Dodge Data said March’s numbers, while still a dip, were more of a realistic showing. It will be interesting to see if the construction starts in the coming months more closely align with March’s results.
American Institute of Architects Architectural Billings Index:
Architectural Billings Rise
The month ended on a high note with the April 22 release of the Architectural Billings Index (ABI) from the American Institute of Architects (AIA). The AIA reported an increase in the number of billings for the second consecutive month in March, reflecting great news for the coming months in the commercial and industrial sectors. The March ABI score was 51.7, up from 50.4 in February. The new projects inquiry index also increased to 58.2, up from 56.6 in February.
The AIA says billings can predict construction spending for 9 to 12 months into the future. The greater the interest and activity during the early design stages, the more construction starts there will be down the road. The AIA’s report offered hope for the strength of the industry throughout the rest of 2015.
4. Report Takeaways
Similar to April’s residential reports, the trajectory of the commercial construction sector is unclear. However, most data offered some semblance of positivity when compared with the results of previous months. What may be the most optimistic report of the month, the AIA’s billings index, is also the most speculative. The number of construction starts is more of a concrete look into the state of the industry.
Experts hope the momentum in commercial construction experienced in major cities expands to the rest of the country. It will be fascinating to find out if the commercial construction sector will continue to improve, as many reports indicate, or if it will slide back to disappointing results.
Reprinted with permission from ConstructionDIVE. The original article is available at http://tinyurl.com/o2q7uu7.