AGC members polled about the outlook for 10 categories of construction in 2011 remained cautious but were more upbeat about hiring than in 2010, AGC and survey cosponsor Navigant reported today (www.agc.org). Only 16% of the responding general and specialty contractors said they expect the construction market to resume growing in 2011, 48% in 2012, 23% in 2013, and 13% in 2014. About 27% said they plan to add staff in 2011, while only 20% anticipate layoffs. In 2010, 55% of respondents laid off staff and only 20% expanded. But in every category, respondents who expect a lower dollar volume of projects outnumbered those who expect an upturn. The most optimistic views were for hospital/higher education construction (with 32% expecting to compete for more work and 36% less work) and power construction (29% higher, 32% lower). At the other extreme were private office (13% higher, 56% lower); highway (14% higher, 49% lower); retail, lodging and warehouse (18% higher, 52% lower); other transportation (14% higher, 44% lower); and K-12 school (16% higher, 46% lower). One-third of firms bought construction equipment in 2010, more than the 28% that expect to buy in 2011. In 2010, three-fourths of respondents adjusted bids to accept lower profits, including 7% that said they bid at a loss; for 2011, 29% plan to adjust bids to reduce profits, including 3% anticipating a loss.
New construction starts soared 19% in December at a seasonally adjusted annual rate, McGraw-Hill Construction (MHC) reported on Friday, based on data it collected. “Nonresidential building rebounded after a weak November, and nonbuilding construction was lifted by the start of several large electric utility projects. Meanwhile, residential building in December showed slight growth, continuing the gradual upward trend of recent months. For 2010 as a whole, total construction starts dropped 2%..., a less severe decline than the 24% plunge for 2009….‘The construction start statistics during the past year, fluctuated over a set range, with December coming in at the high end of that range while November was at the low end,’” stated Robert Murray, MHC vice president of economic affairs for McGraw-Hill Construction. “‘In effect, the pace of contracting has stabilized, after the steep correction of prior years, although renewed expansion for total construction has yet to take hold given this ongoing up-and-down pattern. The year 2010 did include some positive developments, such as the initial stage of recovery for housing while the rate of descent for commercial building eased. However, institutional building lost further momentum, and public works construction began to retreat.’” One contributor to the December spurt was “a 172% surge for healthcare facilities, which reflected the start of six massive hospital projects valued each at $200 million or greater. At the top of the list was the $1.0 billion medical center for the University of California at San Francisco, followed by the $690 million Parkland hospital replacement in Dallas.”
A poll of 84 corporate and trade association economists showed very positive expectations for economic growth, hiring, and capital spending—including for structures, the National Association for Business Economics reported today (www.nabe.com). One-fifth of respondents said they expect inflation-adjusted gross domestic product to grow between 3.1% and 4.0% in 2011, with 62% expecting growth of 2.1% to 3.0% and only 1% expecting a decline. About 42% said their firms would increase employment in the next six months, vs. only 7% that foresee a decrease—the most positive spread in the 12-year history of the question. About 62% of respondents said their firms would increase capital spending in the next 12 months, vs. 8% who expect a decrease—a large improvement in outlook from the October survey. Of the 53 respondents to a question about spending on structures, 29% said they expect an increase at their firms in the next 12 months (up from 24% in October), vs. 14% who expect a decrease (down from 22% in October).
“The 22,536 units forecast by CoStar to be added to the nation's apartment supply in 2011 is expected to spike up to 94,588 units in 2012 and just over 109,000 units in 2013 -- increases of 320% and 384%, respectively -- over the current year,” real-estate information-provider CoStar reported in Thursday’s CoStar Advisor Newsletter (www.costar.com). “AvalonBay Communities and Equity Residential started nearly 1,550 apartments between them through late 2010. AvalonBay has a pipeline of nearly 7,000 units of multifamily commercial properties in various stages of construction and planning. Other savvy investors, such as USAA Real Estate, Hines, Gables Residential and Wood Partners, have announced joint ventures or stepped-up development plays and acquisition of apartment buildings for sale in recent weeks….Builders have historically pulled about twice as many single-family permits as multifamily permits. However, the ratio of multifamily to single-family has shifted in most regions of the country, and it wouldn't be surprising to see more apartment development than single-family development going forward, particularly in the major U.S. markets along the east and west coasts,” according to a recent analysis by CoStar Senior Real Estate Economist Katie Pelczar.
“Of the $5.5 billion worth of Recovery Act projects that the General Services Administration (GSA) has managed, it estimates it will deliver them at $565 million under their projected costs,” Federal Times reported today. “It has obligated $5.2 billion of its stimulus funds and spent $1.2 billion. It is now spending $40 million to $50 million a week on more than 256 construction projects….The $565 million GSA has saved will be redirected to 17 other projects, including the expansion at San Ysidro, [California,] said GSA spokeswoman Emily Barocas. That will bring the total number of GSA's Recovery Act projects to 270.”
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