{"id":6855,"date":"2014-05-01T00:00:00","date_gmt":"2014-05-01T00:00:00","guid":{"rendered":"https:\/\/insulation.org\/io\/articles\/gazing-into-the-crystal-ball-3\/"},"modified":"2024-03-05T22:58:14","modified_gmt":"2024-03-05T22:58:14","slug":"gazing-into-the-crystal-ball-2014","status":"publish","type":"articles","link":"https:\/\/insulation.org\/io\/articles\/gazing-into-the-crystal-ball-2014\/","title":{"rendered":"Gazing into the Crystal Ball 2014"},"content":{"rendered":"


\n Construction Market
\nForecast: Slow and Steady 2014<\/strong>\n<\/p>\n


\n By Tim Grogan and Tom
\nIchniowski<\/em><\/strong>\n<\/p>\n

\n It has been a long time coming, but
\nthe construction recovery seems to be
\nalmost here. The housing market has been
\nkeeping up construction growth, which is
\nrebounding from record lows, but now
\nmany of the nonresidential building
\nmarkets are starting to turn the corner,
\nmaking for many optimistic forecasts for
\n2014. The remaining drag on construction
\ngrowth for next year is the public
\nsector, which continues to be squeezed
\nby the battle over the federal deficit.\n<\/p>\n

\n Some economists, however, see a
\nsilver lining even there. “The
\nrecession pushed millions of workers out
\nof the industry, and it is not going to
\nbe easy to get them back, so a slow but
\nsteady recovery might be the best thing
\nfor helping to control inflation,”
\nsays Randy Giggard, Chief Economist for
\nthe Fails Management Institute (FMI),
\nRaleigh, North Carolina. “You
\ncould make a similar argument for some
\nof the materials markets.”\n<\/p>\n

\n Construction market fundamentals are
\nthere for even stronger growth, but
\nmarkets are hobbled by political
\nuncertainty generated by chronic budget
\nbattles between Democrats and
\nRepublicans. All the forecasts collected
\nby the Engineering News-Record (ENR)
\ntake into consideration this political
\nuncertainty, but if politics spins out
\nof control again, the rather optimistic
\nconsensus among economists for 2014
\ncould suddenly turn less sunny. For now,
\nall the forecasts suggest the industry
\ncan look, as the Monty Python song says,
\n“on the bright side of
\nlife.”\n<\/p>\n

\n The McGraw Hill Construction (MHC)
\nforecast for 2014 is certainly on the
\nbright side, calling for a 9% increase
\nin construction starts next year. It
\nalso predicts strong double-digit growth
\nin the dollar value of single-family
\nhousing, multifamily housing, and
\ncommercial buildings. MHC also is
\nforecasting that a 3-year decline in
\ninstitutional buildings will be checked
\nin 2014 with a modest 2% gain next year.
\nManufacturing work is forecast to
\nincrease 8% next year, following a 6%
\nincrease this year. MHC expects public
\nworks to fall another 5% next year,
\nwhile the power market drops 33%.\n<\/p>\n

\n “Our outlook is positive, with
\na few caveats,” says Robert Murray, MHC
\nChief Economist. “This is another
\nstep on the way to a more full-fledged
\nexpansion,” he adds.
\n“Because this is a measured
\nexpansion, there is a very good chance
\nthis forecast will play out.”\n<\/p>\n

\n Murray cautions the industry not to
\nget too excited about percent changes.
\nWhile MHC is seeing good growth in the
\nresidential and commercial markets, and
\nmany nonresidential building markets are
\nstarting to turn the corner, most are
\nstill below peak levels, Murray says.\n<\/p>\n

\n Murray puts himself in the
\n“slow-and-steady is not a bad
\nthing” camp. &#8220The way the
\nrecovery is unfolding is beneficial for
\n2 reasons: It lessens the chance of
\nanother boom-then-bust cycle, and it
\nallows for labor constraints to be less
\nsevere,” he says.\n<\/p>\n

\n Robert Denk of the National
\nAssociation of Home Builders (NAHB),
\nWashington, D.C., agrees that slower is
\nbetter-do not get too excited about
\npercent changes. “We are seeing
\nsome great percent increases, but we are
\nstill short of where we would like to
\nbe,” he says. For Denk, a
\n“normal” market would be
\nabout 1.3 million housing starts a year.
\nNAHB estimates that total housing starts
\nwill increase a healthy 18%, to 924,000,
\nthis year. NAHB predicts the market will
\napproach ”normal” next year,
\nwith 1.15 million starts.\n<\/p>\n

\n While double-digit increases in
\nhousing are driving overall construction
\ngrowth, economists are just as excited
\nabout some broad swings in the
\nnonresidential markets that they see
\ncoming next year. Murray predicts that
\nDodge starts for educational buildings
\nwill swing from a negative 3.4% this
\nyear to a positive 3.0% in 2014. He also
\nsees health care going from a minus 2.8%
\nthis year to a plus 2.0% next year.
\n“The key for 2014 is institutional
\nbuildings. Can [that market] stabilize,
\nor is there room for further declines?
\n” he asks. Murray’s forecast calls
\nfor the institutional building market to
\nbounce back 2% next year, after falling
\n4.4% in 2013.\n<\/p>\n

\n Similar Swings<\/strong>\n<\/p>\n

\n FMI’s Randy Giggard predicts similar
\nswings. FMI’s forecast calls for the
\noffice market to go from a minus 2% to a
\nplus 4%, for school building to go from
\na 4% decline to a 4% increase, and
\nhealth-care work from down 1% to up 6%.
\n“Health care follows a natural
\ncycle, and it is just time to start
\nbuilding more hospitals,” Giggard
\nsays. “And people keep voting for
\nschool building bonds, so that market is
\nlooking good, too,” he adds.\n<\/p>\n

\n The Portland Cement Association
\n(PCA), Skokie, Illinois, is predicting
\nan 8% increase in construction put-in-place next year, compared to an
\nestimated increase of just 1.3% this
\nyear. The PCA forecast is a little more
\nbullish on public construction than
\nother forecasts. PCA predicts growth in
\nthe overall public market will swing
\nfrom a negative 5.2% this year to a
\npositive 3.4% in 2014.\n<\/p>\n

\n The Associated Builders and
\nContractors (ABC), Washington, D.C., is
\nforecasting a 6% increase in
\nconstruction next year. “Our model
\nshows next year’s growth of 5% for
\ncommercial construction, 7% for health
\ncare, 8% for lodging, and 6% for
\ncommunications,” says Anirban
\nBasu, ABC’s chief economist.\n<\/p>\n

\n The forecast for highway paving and
\nbridge work by the American Road &
\nTransportation Builders Association
\n(ARTBA), Washington, D.C., is mixed,
\nwith tepid growth for paving work but
\nrelatively strong growth for bridge
\nconstruction. “The 1.9% increase in
\npaving work we are forecasting for next
\nyear barely even qualifies as a
\nrebound,” says Alison Black, ARTBA’s
\nchief economist. She estimates the
\npaving market fell 11.4% this year,
\nfollowing a 3.3% decline in 2012.
\n“The pavement market looks pretty
\nsluggish over the next few years,”
\nshe adds.\n<\/p>\n

\n Bridge work, on the other hand, is
\ngrowing at a steady pace. ARTBA predicts
\nthe dollar value for bridge work in 2014
\nwill increase another 5.6%, after
\nincreasing 7.1% this year and 5.1% in
\n2012.\n<\/p>\n

\n “We have seen a big divergence
\nbetween the highway and bridge
\nmarkets,” says Black. “On
\nthe pavement side, we have seen a
\nsignificant pullback in state and local
\nspending. But what is really holding
\ndown our forecast is the questions over
\nthe Highway Trust Fund,” she adds.
\n“There is very little money going
\ninto new construction.”\n<\/p>\n

\n Indeed, federal government funding
\nis a key issue for many construction
\nmarkets next year because of its
\nuncertainty. A congressional budget
\nstandoff caused a 16-day shutdown of
\nmuch of the federal government in
\nOctober, further unsettling the
\ncompanies that pursue federal
\nconstruction projects.\n<\/p>\n

\n During the shutdown, many agencies
\ndid not award new contracts, and there
\nalso was a temporary halt in the Corps
\nof Engineers’ processing of permits to
\nbuild in and around wetlands.\n<\/p>\n

\n Finally, on October 16,
\ncongressional leaders reached an
\nagreement to extend funding through
\nJanuary 15 and brought federal workers
\nback on the job. The measure also
\naverted a government default by raising
\nthe debt ceiling through February 7.\n<\/p>\n

\n In addition, the deal called for
\nmembers of the House and Senate budget
\ncommittees to begin negotiations toward
\na budget blueprint for fiscal year 2014.
\nIf enacted, it would be the first budget
\nresolution to become law since 2009. The
\njoint House-Senate budget conference
\ncommittee held its first meeting on
\nOctober 30 and met again on November 13
\nbut did not reach an agreement.\n<\/p>\n

\n The conferees, led by House Budget
\nCommittee Chairman Paul Ryan (R-WI) and
\nSenate Budget Panel Chairman Patty
\nMurray (D-WA), face a December 13
\ndeadline to produce a deal. (Note: Since
\nprinting, this deadline passed and was
\nnot met. Budget negotiations are still
\nin progress).\n<\/p>\n

\n Murray said the minimum goal would
\nbe to set an overall discretionary-spending cap for 2014. While the House
\napproved a $966-billion limit, and the
\nSenate passed a $1.058-trillion cap.\n<\/p>\n

\n If the budget conferees can agree on
\na compromise “top line”
\nspending figure, the House and Senate
\nappropriations committees would set to
\nwork to determine 2014 funding levels
\nfor each line-item account, including
\nconstruction programs. Another open
\nquestion is whether the budget conferees
\nwill replace the mandatory budget
\nsequester’s wide-ranging spending
\nreductions with some alternate formula
\nfor reductions. The 2013 sequester round
\ncut construction spending by $4 billion,
\naccording to ENR’s estimate.\n<\/p>\n

\n

\n
\n Reprinted courtesy of
\nEngineering News-Record, copyright
\nMcGraw Hill Financial, December 2\/9,
\n2013, All rights reserved. The full
\nreport (subscription required), is
\navailable at <\/em>
\nhttps:\/\/enr.construction.com\/engineering
\n\/subscription\/LoginSubscribe.aspx?
\ncid=27158.\n <\/p>\n<\/div>\n

\n <\/strong>\n<\/p>\n


\n Construction Firms Expect
\nGrowing Demand in 2014<\/strong>\n<\/p>\n

\n Many firms plan to start hiring
\nagain, and most contractors predict
\ndemand will either grow or remain stable
\nin virtually every market segment this
\nyear, according to survey results
\nreleased on January 21, 2014 by the
\nAssociated General Contractors of
\nAmerica (AGC). The survey, conducted as
\npart of Optimism Returns: The 2014
\nConstruction Industry Hiring and
\nBusiness Outlook, provides a generally
\nupbeat outlook for the year even as
\nfirms worry about growing worker
\nshortages, rising costs, and the impact
\nof new regulations and federal budget
\ncutting.\n<\/p>\n

\n “Contractors are more
\noptimistic about 2014 than they have
\nbeen in a long time,” said Stephen
\nE. Sandherr, the AGC’s Chief Executive
\nOfficer. “While the industry has a
\nlong way to go before it returns to the
\nemployment and activity levels it
\nexperienced in the middle of the last
\ndecade, conditions are heading in the
\nright direction.”\n<\/p>\n

\n Sandherr noted that many firms plan
\nto begin hiring again, while relatively
\nfew plan to start making layoffs. Forty-one percent of firms that did not change
\nstaff levels last year report they plan
\nto start expanding payrolls in 2014,
\nwhile only 2% plan to start making
\nlayoffs. However, net hiring is likely
\nto be relatively modest, with 86% of
\nfirms reporting they plan to hire 25 or
\nfewer new employees this year.\n<\/p>\n

\n Among the 19 states with large
\nenough survey sample sizes, 100% of
\nfirms that did not change staffing
\nlevels last year in Utah plan to start
\nhiring new staff this year, more than in
\nany other state.\n<\/p>\n

\n Contractors have a relatively
\npositive outlook for virtually all 11
\nmarket segments covered in the Outlook,
\nin particular for private-sector
\nsegments. For 5 of those segments, at
\nleast 40% of respondents expect the
\nmarket to expand, and fewer than 20%
\nexpect the market to decline in 2014.
\nThe difference between the optimists and
\npessimists-the net positive reading-is a
\nstrong 28% for private office,
\nmanufacturing, and the combined
\nretail\/warehouse\/lodging segments; and
\n25% for power and hospital\/higher
\neducation construction.\n<\/p>\n

\n Among public-sector segments,
\ncontractors are more optimistic about
\ndemand for new water and sewer
\nconstruction, with a net positive of
\n17%. Contractors are mildly optimistic
\nabout the market for highway
\nconstruction, with a net positive of
\n10%. Respondents are almost equally
\ndivided regarding the outlook for the
\nother 4 segments, ranging from net
\npositives of 5% for public buildings, 4%
\nfor schools, and 3% for transportation
\nfacilities other than highways, to a
\nnegative of 2% for marine construction.\n<\/p>\n

\n Sandherr added that contractors’
\nmarket expectations are significantly
\nmore optimistic than they were at this
\ntime last year. At that time, more
\ncontractors expected demand to shrink
\nfor highway, other transportation,
\npublic building, retail, warehouse and
\nlodging, K-12 schools, and private
\noffices than expected it to grow.\n<\/p>\n

\n Many contractors also report they
\nplan to add new construction equipment
\nin 2014. Seventy-three percent of firms
\nplans to purchase construction
\nequipment, and 86% report they plan to
\nlease it this year. The scope of those
\ninvestments is likely to be somewhat
\nlimited, however. Forty-four percent of
\nfirms say they will invest $250,000 or
\nless in equipment purchases, and 53% say
\nthey will invest that amount or less for
\nnew equipment leases.\n<\/p>\n

\n One reason firms may be more
\noptimistic, association officials noted,
\nis that credit conditions appear to have
\nimproved. Only 9% of firms report having
\na harder time getting bank loans, down
\nfrom 13% in last year’s survey. Only 32%
\nreport customers’ projects were delayed
\nor canceled because of tight credit
\nconditions, compared with 40% a year
\nago.\n<\/p>\n

\n “While the Outlook is
\nsignificantly more optimistic than in
\nyears past, there are still areas of
\nconcern for most contractors,”
\nsaid Ken Simonson, AGC’s Chief
\nEconomist. “Many firms will
\nstruggle to find enough skilled workers,
\ncope with escalating materials and
\nhealth care costs, and comply with
\nexpanding regulatory burdens.”\n<\/p>\n

\n Ninety percent of construction firms
\nreport they expect prices for key
\nconstruction materials to increase in
\n2014. Most, however, expect those
\nincreases will be relatively modest,
\nwith 43% reporting they expect the
\nincreases to range between 1 and 5%.
\nMeanwhile, 82% of firms report they
\nexpect the cost of providing health-care
\ninsurance for their employees will
\nincrease in 2014. Despite that, only 1%
\nof firms report they plan to reduce the
\namount of health-care coverage they
\nprovide.\n<\/p>\n

\n Simonson noted that as firms
\ncontinue to slowly expand their
\npayrolls, they were likely to have a
\nharder time finding enough skilled
\nconstruction workers. Already, 62% of
\nresponding firms report having a
\ndifficult time filling key professional
\nand craft worker positions; two-thirds
\nof firms expect it will either become
\nharder or remain as difficult to fill
\nprofessional positions; and 74% say it
\nwill get harder, or remain as hard, to
\nfill craft worker positions.\n<\/p>\n

\n Those worker shortages are already
\nhaving an impact, the economist added.
\nFifty-two percent of firms report they
\nare losing construction professionals to
\nother firms or industries, and 55%
\nreport they are losing craft workers. As
\na result, a majority of firms report
\nthey have improved pay and benefits to
\nhelp retain qualified staff. One reason
\nthey are likely worried is that nearly
\nhalf of the firms believe training
\nprograms for new craft workers are poor
\nor below average.\n<\/p>\n

\n Adding to their challenges, 51% of
\ncontractors report that demand for their
\nservices is being negatively impacted by
\nfederal funding cuts, new federal
\nregulations, and\/or Washington’s
\ninability to set an annual budget.
\n“It would appear that Washington
\nis not here to help as far as
\ncontractors are concerned,“
\nSimonson noted.\n<\/p>\n

\n Association officials added that
\nsurvey respondents would prefer that
\nWashington officials work on other
\npriorities. Seventy-seven percent of
\nfirms reported listed having Washington
\nfind ways to make it easier to prepare
\nthe next generation of skilled workers
\nas a top priority, 63% listed repealing
\nall or part of the Affordable Care Act
\nas a top priority, and 63% listed
\nrenewing tax deductions and bonus
\ndepreciation for construction equipment
\nas a top priority.\n<\/p>\n

\n The Outlook was based on survey
\nresults from over 800 construction firms
\nfrom every state and the District of
\nColumbia. Varying numbers responded to
\neach question. Contractors of every size
\nanswered over 40 questions about their
\nhiring, equipment purchasing, and
\nbusiness plans.\n<\/p>\n

\n

\n The Optimism Returns: The
\n2014 Construction Hiring and Business
\nOutlook report is available in full at
\n<\/em><\/p>\n

www.agc.org\/galleries\/news\/2014%20Constr
\nuction%20Hiring%20and%20Business%20Outlo
\nok%20Report%20%282%29.pdf\n <\/p>\n<\/div>\n

\n <\/strong>\n<\/p>\n


\n Nonresidential Construction
\nIndex (NRCI) Predicts Growth, Hiring
\nConcerns in 2014 <\/strong>\n<\/p>\n

\n Nearly all components of the FMI’s
\n2014 first quarter NRCI report are on
\nthe rise. The NRCI bounced back from a
\ndrop of 2.9 points in the fourth quarter
\nof 2013 to register 64.9 in the first
\nquarter of 2014, the highest mark yet
\nfor the NRCI and 6.8 points better than
\nthe first quarter in 2013. FMI’s current
\nreport and reports from other sources
\nand surveys are beginning to indicate a
\ngrowing industry challenge to find and
\nhire more talented people.\n<\/p>\n

\n That concern will continue,
\naccording to 49% of FMI’s panelists who
\nexpect growth in construction to improve
\nfrom 2.6% to 5% next year, while 36%
\nexpect more modest growth. Few expect
\nslower growth, and only 3% expect more
\nexpansive growth. The forecast for
\nconstruction growth is nearly matched
\nwith the expectation of hiring growth.
\nMore likely, hiring will continue to lag
\ngrowth in backlog since most panelists
\ndo not expect to hire until they
\nabsolutely need to and current staff is
\nconsistently maxed out. One of FMI’s
\npanelists explained, “We are
\nfocused on hiring the top talent
\navailable before we need the help.
\nWaiting to hire a body because you have
\nmore work than you can handle produces
\nweak results and unhappy teams.”
\nThe question as to when to hire is
\nsomething each company will have to
\nanswer for itself, but the report notes
\nthat hiring talented people ranks at the
\ntop of the challenges for 2014 given by
\nFMI’s panelists.\n<\/p>\n

\n

\n The NRCI report was prepared
\nby FMI. The full report is available
\nonline at
\n<\/em>www.fminet.com\/visitor\/download\/fre
\neDownload\/id\/557\n <\/p>\n<\/div>\n

\n <\/strong>\n<\/p>\n


\n After a Year of Moving
\nSideways, Nonresidential Building
\nActivity Poised to Resume Recovery in
\n2014 <\/strong>\n<\/p>\n

\n By Kermit Baker<\/em>
\n<\/strong>\n<\/p>\n

\n Nonresidential building activity had
\na disappointing performance in 2013,
\nwith spending levels largely unchanged
\nfrom those of 2012. However, 2014 looks
\nto be a better year, with building
\nactivity increasing 5.8% overall,
\nincluding a double-digit gain for
\ncommercial facilities. The recovery will
\ncontinue into 2015, with spending
\nincreasing 8% overall and 6% for
\ninstitutional buildings.\n<\/p>\n

\n These are some of the key findings
\nfrom the American Institute of
\nArchitects’ (AIA’s) Consensus
\nConstruction Forecast, conducted in
\nDecember 2013. Semiannually, the AIA
\ncompiles results from the leading
\nnational construction forecasters to
\ndevelop its consensus. The forecasters
\nlowered their outlook for 2014 from the
\n2013 midyear update, which had projected
\n7.6% growth for the coming year.
\nHowever, disruptions in the economy in
\nthe second half of the year stalled the
\nconstruction recovery, modestly pushing
\nback growth rates.\n<\/p>\n

\n Economy Moves Toward
\nStronger Growth<\/strong>\n<\/p>\n

\n After generating more than 5% growth
\nin spending in 2012-reversing a steep 4-year decline-nonresidential building
\nactivity was poised to continue its
\nrecovery in 2013. However, a few
\nroadblocks materialized: The popular
\nsuspects included a federal budget
\nsequester that scaled back government
\nspending, a federal government shutdown,
\ncredit restrictions for construction
\nprojects, and rising long-term interest
\nrates motivated by concern that the Fed
\nwas going to scale back its stimulus.\n<\/p>\n

\n While all of these factors certainly
\nplayed a role in holding back more
\nbuilding activity, the problem was more
\nencompassing. The U.S. economy appears
\nto have grown less than 2% last year,
\nwell below the 2.8% pace of 2012.
\nUnfortunately, the United States was not
\nthe only laggard. World economic growth
\nhad its worst performance since the 2009
\nglobal financial meltdown, garnering
\nonly a 2.9% growth rate, according to
\nestimates from the International
\nMonetary Fund (IMF). The economies of
\nvirtually every major region of the
\nworld either declined or saw slower
\nrates of growth last year, as compared
\nto 2012. Slower international growth
\naffected U.S. exports, which, coupled
\nwith ongoing domestic concerns,
\ndiscouraged construction activity.\n<\/p>\n

\n What will change in 2014? The
\ninternational economy is expected to
\nmove back to more traditional growth
\nlevels, with world economic growth
\nexpected to increase almost a full
\npercentage point, according to the IMF.
\nBut there are more improvements on the
\nhorizon closer to home.\n<\/p>\n

\n Home building is expected to see
\nstrong gains. The slowdown in household
\nformations during the foreclosure crisis
\nis expected to reverse, and steady gains
\nin house prices will bolster confidence
\nthat it is once again safe to buy a
\nhome. The consensus is that housing
\nstarts will increase 25% this year, but
\neven that pace of growth would only
\nproduce between 1.1 and 1.2 million
\nstarts, well below long-term trends.\n<\/p>\n

\n Energy is a net positive for the
\neconomic outlook. After decades in which
\nenergy costs were a principal risk
\nfactor to the economy, they have
\ntransformed into a positive benefit. In
\nrecent years, hydraulic fracturing has
\ndramatically increased domestic
\nproduction of both crude oil and natural
\ngas. As a result, household energy costs
\nhave been trending down for the past 5
\nyears.\n<\/p>\n

\n The manufacturing sector is strong.
\nAfter a steep downturn in production
\noutput during the recession, the
\nmanufacturing sector has come roaring
\nback. In spite of relatively weak growth
\nin the overall economy, industrial
\nproduction has averaged gains of almost
\n4% per year over the past 4 years, the
\nstrongest 4-year performance since the
\nlate 1990s. Lower energy costs are a
\nmajor factor in making domestic
\nmanufacturing more attractive,
\nparticularly for energy-intensive
\nindustries like steel and chemicals.\n<\/p>\n

\n Consumer spending is increasing.
\nConsumer spending for large-ticket
\npurchases has been one of the bright
\nspots in the economy in recent years,
\nhaving grown 6% or more for each of the
\npast 4 years. With household wealth
\nlevels now 10% above their pre-recession
\nhigh, consumer spending is likely to
\ncontinue. Encouragingly, a higher share
\nof the wealth gain now comes from home
\nequity, which is more broadly enjoyed
\nthan other forms of wealth.\n<\/p>\n

\n This is not to say that there will
\nnot be economic challenges moving
\nforward. The unemployment rate remains
\nhigh, and 2013 ended with fewer workers
\non payrolls than before the recession.
\nThe United States has a large and
\ngrowing federal debt level, a situation
\nthat is likely to be a contentious
\npolitical issue as the next debt ceiling
\nlimit approaches in the next few months.
\nIt is still too early to tell how the
\neconomy will respond to the Fed’s
\nwinding down of its bond-buying program.\n<\/p>\n

\n Construction on a Solid
\nFooting<\/strong>\n<\/p>\n

\n With the economy finally
\nstabilizing, there should be some
\nsubstantial improvement in the
\nconstruction outlook. Both design
\nactivity at architecture firms and the
\nfundamentals of the commercial property
\nmarket point to healthy growth moving
\nforward.\n<\/p>\n

\n Even with a modest dip last November
\nand December, the AIA’s Architecture
\nBillings Index (ABI) has risen in the
\nvast majority of the last 16 months.
\nWith such sustained growth in design
\nactivity, continued improvement in
\nconstruction activity will follow suit.
\nWhile the residential sector has led the
\nupturn in the ABI, firms specializing in
\nthe commercial\/industrial sector have
\nreported solid results for most of the
\npast year. Even firms serving the
\ninstitutional sector have generally been
\nreporting modest levels of growth over
\nthe past year.\n<\/p>\n

\n In recent months, sunbelt firms have
\nenjoyed the best business conditions.
\nThese regions tended to be the most
\noverbuilt prior to the downturn. Now
\nthat growth is returning, markets in
\nthese regions are capturing a
\ndisproportionate share of activity. For
\nexample, a recent analysis of
\nconstruction employment growth in metro
\nareas conducted by AGC using U.S.
\nDepartment of Labor data reported that
\nmetro areas in the West accounted for 5
\nof the top 10 areas in the country in
\nterms of construction jobs added over
\nthe past year. Three of these top growth
\nmarkets were in California. Two
\nadditional growth markets were in the
\nSouth. Still, in Boston, New York, and
\nMinneapolis\/St. Paul, which have not
\nseen much population growth in recent
\nyears, a strong economy has put these 3
\nin the top 10 in terms of gains in
\nconstruction employment over the past
\nyear.\n<\/p>\n

\n In addition to increased workloads
\nat architecture firms, indicators from
\nthe construction sector point to
\nincreased activity levels moving
\nforward. Commercial property values—which declined at a steeper rate
\nnationally than did house prices during
\nthe recession—have recovered nicely. As
\nof late 2013, commercial property values
\nhad gained back almost two-thirds of
\ntheir losses, according to data from
\nMoody’s\/Real Capital Analytics
\nCommercial Property Price Index.\n<\/p>\n

\n Other commercial market indicators
\npoint to strength. Vacancy rates for
\noffices and retail facilities have been
\ndeclining recently, and occupancy rates
\nat hotels have been increasing. Over the
\nnext 2 years, vacancy rates are expected
\nto continue to decline for offices and
\nretail facilities, and rents are
\nprojected to increase, according to a
\nconsensus forecast of industry experts
\nconducted last October by the Urban Land
\nInstitute. These indicators reflect a
\ngrowing demand for commercial space.\n<\/p>\n

\n Supply Conditions Still a
\nConcern<\/strong>\n<\/p>\n

\n In spite of a weak overall recovery
\nto date, supply conditions for
\nnonresidential building are unusually
\ntight. Construction financing remains a
\nproblem. Bank credit standards for
\nconstruction and land development loans
\nhave eased modestly, according to the
\nOctober Federal Reserve Board Senior
\nLoan Officer Survey. However, the modest
\neasing does not offset the sharp
\nincrease in demand for these loans that
\nmany of the loan officers are reporting.\n<\/p>\n

\n Contractors are having difficulty
\nfinding workers. In spite of a high
\nunemployment rate among construction
\nworkers, home builders and
\nnonresidential building contractors
\nreport difficulties filling positions. A
\nsurvey by AGC in August found that
\nalmost three-quarters of contractors
\nreported problems filling at least some
\nof their craft positions, and over half
\nwere having trouble filling professional
\npositions. Only 12% of contractors that
\nwere hiring reported no problems filling
\npositions.\n<\/p>\n

\n Construction costs are also rising.
\nIn a low-inflation environment with weak
\nlevels of construction activity,
\nconstruction costs would be expected to
\nbe stable at worst. However, the U.S.
\nDepartment of Labor reported that
\nproducer prices for major nonresidential
\nbuilding types have risen in the 3 to 4%
\nrange over the past year. Overall
\nconsumer inflation increased by only 1%
\nover this period, and producer prices
\nwere up only 0.7%. Lumber, plywood, and
\ngypsum prices were up at a double-digit
\npace over this period, with insulation
\nmaterials up almost as much.\n<\/p>\n

\n Building Activity
\nResumes<\/strong>\n<\/p>\n

\n With less of a decline in government
\nspending, and with healthy fundamental
\nconditions in the nonresidential
\nbuilding sector (growing property
\nvalues, declining vacancies, and
\nincreasing rents), 2014 should produce
\nhealthy gains in nonresidential building
\nactivity. With spending stronger in the
\nprivate side of the economy, the
\ncommercial\/industrial building sector is
\nexpected to be resurgent. In 2013, when
\noverall nonresidential building spending
\nsaw almost no growth, spending on
\ncommercial and industrial facilities
\nincreased about 5%. Growth in this
\nsector will accelerate this year,
\nreaching 10%, according to the
\nconsensus forecast panel, and will see
\nslightly stronger growth in 2015. The
\nhotel sector is expected to be the
\nstrongest commercial sector this year,
\nbut offices and retail space also should
\nsee healthy gains.\n<\/p>\n

\n Institutional building lost ground
\nlast year, but 2014 should usher in the
\nlong-awaited institutional building
\nrecovery. Spending gains are expected to
\nreach 3.4% this year, and accelerate to
\n6.3% in 2015. Health care is expected to
\nbe one of the stronger institutional
\nsectors this year and next, but the
\neducation market should also see healthy
\ngains.\n<\/p>\n

\n

\n
\n Article reprinted with
\npermission from AIA’s magazine,
\nAIArchitect, January 24, 2014 issue,
\nVol. 21. This article and AIArchitect
\ncan be accessed online at <\/em>
\nwww.aia.org\/practicing\/AIAB101318.
\n<\/em>\n <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A look at 4 different predictions from construction sources about what will impact the industry in 2014.<\/p>\n","protected":false},"author":[656],"featured_media":0,"template":"","categories":[37,24,21,302],"class_list":["post-6855","articles","type-articles","status-publish","hentry","category-market-research","category-contracting","category-business-managment","category-economy","author-nia-staff"],"acf":[],"yoast_head":"\nGazing into the Crystal Ball 2014 - Insulation Outlook Magazine<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/insulation.org\/io\/articles\/gazing-into-the-crystal-ball-2014\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Gazing into the Crystal Ball 2014\" \/>\n<meta property=\"og:description\" content=\"A look at 4 different predictions from construction sources about what will impact the industry in 2014.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/insulation.org\/io\/articles\/gazing-into-the-crystal-ball-2014\/\" \/>\n<meta property=\"og:site_name\" content=\"Insulation Outlook Magazine\" \/>\n<meta property=\"article:modified_time\" content=\"2024-03-05T22:58:14+00:00\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"21 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/insulation.org\/io\/articles\/gazing-into-the-crystal-ball-2014\/\",\"url\":\"https:\/\/insulation.org\/io\/articles\/gazing-into-the-crystal-ball-2014\/\",\"name\":\"Gazing into the Crystal Ball 2014 - 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