Gazing into the Crystal Ball
Green Building Market Grows 50 Percent in 2 Years Despite Recession
The U.S. green building market is accelerating at a dramatic rate, says McGraw-Hill Construction’s Green Outlook 2011: Green Trends Driving Growth report. The value of green building construction starts was up 50 percent from 2008 to 2010—from $42 billion to $55 billion-$71 billion—and represents 25 percent of all new construction activity in 2010. According to projections, the green building market size is expected to reach $135 billion by 2015.
Green building is the bright spot in an otherwise tough economy, and in some sectors, that rate of growth has been remarkable. In nonresidential building, for example, the green building market share is even higher than the overall market. Today, a third of all new nonresidential construction is green—a $54 billion market opportunity. In 5 years, nonresidential green building activity is expected to triple, representing $120 billion to $145 billion in new construction (40-48 percent of the nonresidential market) and $14 billion to $18 billion in major retrofit and renovation projects.
To break it down further, health-care construction this year is expected to grow its green share to as much as 40 percent (valued at $8 billion-$9 billion in 2010). Education (valued at $13 billion?$16 billion in 2010) and office green construction (valued at $7 billion?$8 billion in 2010) also remain strong sectors, showing high increases in market share, due in part to the fact that bigger projects are the most likely to “go green.” This year, the U.S. Green Building Council’s LEED specification is mentioned in 71 percent of all projects valued at over $50 million.
Aside from market size estimates, the 32-page Green Outlook 2011 report provides insights into key trends, perceptions, and motivators in the green building space. For example, building owners cited three business benefits as the main drivers for building green:
- Reduction in operating costs of 13.6 percent on average for new buildings and 8.5 percent for retrofits;
- Increase in building values of 10.9 percent for new buildings and 6.8 percent for retrofits; and
- Increase in return on investment (ROI) of 9.9 percent for new buildings and 19.2 percent for retrofits.
Beyond these bottom-line advantages, McGraw-Hill Construction attributes green building’s rapid expansion to owners’ desire for market differentiation, growing public awareness, and an increase in local and federal government regulations. As of September 2010, green building legislation and initiatives were present in 12 federal agencies and 33 states, and the proliferation of local government initiatives have increased at an especially impressive pace—from 156 localities in 2008 to 384 localities in 2010.
McGraw-Hill Construction’s Green Outlook 2011 is
produced by a staff of researchers, economists, and analysts, drawing from its Dodge project database, its construction market forecasts, proprietary market research, and secondary research, as well as extensive data and trend analysis. More information and specific green building projects can be found in the Green Outlook 2011 report and on the GreenSource website. To order a copy of the report, visit www.construction.com/market_research.
Global Insulation Demand to Approach 23 Billion Square Meters in 2014
World demand for insulation is forecast to increase 5 percent per year through 2014 to nearly 23 billion square meters of R-1 value, a substantial improvement over the 2004-2009 rate. Insulation consumption in most industrializing nations will continue to expand at a healthy pace. In developed countries, sales of insulation materials are expected to rebound after falling sharply in 2008 and 2009 because of the global financial crisis. These and other trends are presented in World Insulation, a new study from The Freedonia Group, Inc., a Cleveland-based industry market research firm. Findings also include:
- Nonresidential construction activity and associated insulation demand in industrializing regions are forecast to expand at a healthy pace. The adoption of new insulation standards for buildings and the implementation of government programs to encourage insulation use will spur product sales in many countries.
- The insulation market in North America will register the fastest growth through 2014, driven by the large U.S. market. Insulation consumption in the United States is expected to increase more than 7 percent per year during this time, after it declined dramatically between 2007 and 2009 because of turmoil in the housing sector. The U.S. residential segment will be responsible for nearly all insulation market gains in North America through 2014.
- More than 40 percent of all new insulation demand generated during the 2009-2014 period will be attributable to the Asia/Pacific region. Several Asian countries are forecast to record rapid growth, including India, China, and Indonesia. China alone will account for 29 percent of all new global insulation demand between 2009 and 2014.
World Insulation (published 02/2011, 393 pages) is available for $6,100 from The Freedonia Group, Inc., 767 Beta Drive, Cleveland, OH 44143-2326. For more information, visit www.freedoniagroup.com.
Construction Spending Tumbles to 10-Year Low in December, with “Very Mixed” Outlook for 2011, Says AGC Chief Economist
Rental housing, warehouse, hospital, and factory construction show best prospects for improvement, while schools and other public construction may shrink further
Construction spending tumbled 2.5 percent in December to a $788 billion seasonally adjusted annual rate, the lowest level in a decade, the Associated General Contractors of America (AGC) noted in an analysis of new Census Bureau data. All three major components—private residential, private nonresidential, and public construction—shared in the decline.
“These dismal results show that the agony of the recession continues for millions of construction workers and their firms,” said Ken Simonson, the association’s chief economist. “Construction spending fell again in the last 2 months of 2010, and the preliminary total for the year was the lowest since 2000.”
Simonson noted that there were a few bright spots. Power construction climbed for the fifth straight month and finished the year 13 percent higher than in December 2009, due to a mix of oil and gas-fired power plants, renewable power projects such as solar and wind generation, and transmission lines—all of which Simonson said he expects will continue strongly in 2011. Highway and street construction slipped 1.6 percent in December but was 7.6 percent of the year-earlier level. Spending on transportation facilities, such as truck terminals, airports, and transit projects, was up slightly from November and from year-ago levels.
“The outlook for 2011 is very mixed,” Simonson commented. “Spending on rental housing, warehouses, hospitals, and factories should pick up. Power construction should stay strong, and federal dollars for stimulus and base realignment, or BRAC, projects will continue to sustain some contractors. But public school construction and other state and local projects will keep shrinking, while single-family homebuilding, retail, and office construction are likely to remain feeble.”
Contractors themselves also have mixed views, according to a recent survey sponsored by AGC and Navigant Consulting. On balance, more firms expect to hire workers than to shrink in 2011, by a 27 to 20 percent margin, but only 16 percent of the 1,277 respondents said they thought the overall construction market would pick up in 2011. Nearly half?48 percent?thought the turnaround would occur in 2012, with 36 percent saying it would be even later.
For more information, visit www.agc.org.
Construction Starts to Increase 8 Percent in 2011, Says McGraw-Hill Construction Outlook Report
Residential and commercial construction starts expected to improve in 2011
McGraw-Hill Construction, part of The McGraw-Hill Companies, last fall released its 2011 Construction Outlook, a mainstay in construction industry forecasting and business planning, which predicts an increase in overall U.S. construction starts. The level of construction starts in 2011 is expected to advance 8 percent to $445.5 billion, following the 2 percent decline predicted for 2010.
“While the economy is still facing headwinds, the stage is being set for construction to see modest improvement in 2011 from this year’s very weak activity,” said Robert A. Murray, vice president of economic affairs at McGraw-Hill Construction, addressing nearly 400 construction executives and professionals at the 72nd annual Outlook 2011 Executive Conference in Washington, D.C. “We’re turning the corner, slowly. 2011 will be the first year of renewed growth for overall construction activity, and 2010 becomes the final year of a very lengthy and unusual construction cycle.”
Based on significant research and in-depth analysis of macro-trends, the 2011 Construction Outlook details the forecasts for each construction sector, including:
- Multifamily housing will rise 24 percent in dollars and 23 percent in units, continuing to move gradually upward.
- Commercial buildings will increase 16 percent, following a 3-year decline, which dropped contracting 62 percent 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 percent in 2011, retreating for the third straight year. The difficult fiscal climate for states and localities will continue to dampen school construction, although the health-care facilities category should see moderate growth.
- Manufacturing buildings will increase 9 percent in dollars and 11 percent in square feet.
- Public works construction will drop 1 percent, given the fading benefits of the federal stimulus act for highway and bridge construction.
- Electric utilities will slide 10 percent, falling for the third year in a row.
For more information on the 2011 Outlook, visit http://construction.ecnext.com/coms2/summary_0249-360828_ITM_analytics. To learn more, visit www.construction.com or follow @mhconstruction on Twitter.