“New construction starts in August
advanced 8 percent,” McGraw-Hill Construction reported Sept. 21, based on data
it compiled. “The gain followed a 10 percent decline in July, and continued the
fluctuating pattern that’s been present in recent months. The pickup for total
construction in August was the result of greater activity for each of
construction’s three main sectors - nonresidential building [7 percent],
residential building [4 percent] and nonbuilding construction [13 percent]. For
the first eight months of 2011, total construction on an unadjusted basis
was…down 6 percent from the same period a year ago.”
Nonresidential
building declined 8 percent year-to-date; residential, -5 percent; and
nonbuilding, -4 percent. “‘Over the [latest] three months an up-and-down
pattern has emerged,’ statedRobert A. Murray, vice president of
economic affairs for McGraw-Hill Construction. ‘This suggests that construction
starts are beginning to stabilize after the earlier loss of momentum. At the
same time, total construction remains on track to register a moderate decline
for 2011 as a whole, after leveling off in 2010.
“‘While August
showed some improvement for institutional building and public works, each of
these sectors will be subject to funding cutbacks at the federal and state
levels of government. Single-family housing continues to see homebuyer demand
restrained by the sluggish economic environment and more restrictive lending
standards. And what appears to be the early signs of recovery for commercial
building may well end up being deferred by rising investor concern about
employment growth and the near term prospects for the U.S. economy.’”
Data on August
housing starts and building permits that the U.S. Census Bureau released Sept.
20 show a mixed outlook for residential construction. Single-family starts
dipped 1.4 percent from July’s level and 2.3 percent from August 2010; permits,
a reliable indicator of near-term single family construction, rose 2.5 percent
and 2.0 percent, respectively. Multifamily (two or more units) starts dropped
13 percent and 14 percent but permits climbed 4.5 percent and 22 percent.
Retail,
industrial construction:The outlook for retail construction
remains bleak. Major national retailers at Associated General Contractors’
Public-Private Industry Advisory Council meeting Sept. 23 reported they expect
to spend more on distribution facilities in 2012 than on new or remodeled
stores as they consolidate and speed deliveries to stores and respond to
growing online orders. Other chains continue to give up or market existing
space.
“Sears Holdings
Corp., whose sprawling stores are laden with extra space, is aggressively
marketing itself as a place for other retailers to set up shop,” theWall
Street Journalreported Sept. 23. “Through its real-estate arm,
Sears…has listed on its website nearly 4,000 of its namesake and Kmart stores
that have space for other merchants or retail operations to lease.” Retail
sales at most categories of stores other than gas stations and auto dealers
rose roughly 5-6 percent in the first eight months of 2012 compared with the
same period in 2010, while sales of nonstore retailers (online and mail-order)
jumped 13 percent, the Census Bureau reported Sept. 19.
Online sales
are one factor stimulating warehouse and industrial construction. “Signs of the
market’s growth are apparent in the New
York area,” theNew York Timesreported Sept. 14. In “Edison, New Jersey, the J.G. Petrucci Co. is building a
570,000-square-foot warehouse even though the developer has not lined up a
single tenant….In Robbinsville, N.J., [Matrix Development Group is]
constructing a 150,000-square-foot industrial building for the beverage
distributor Ritchie & Page[. But] smaller properties are
languishing…‘because banks aren’t lending, and people have no equity in their
homes to take out second mortgages to finance new businesses,’” saidJack
O’Connor, a principal and director of the national industrial
practice group at Newmark Knight Frank in Long Island.
“Ports also
play a role in industrial real estate, and in New Jersey investors are making
big bets that port business will increase,” theTimesarticle reported. “This is in part because of a $5.25 billion project to widen
the Panama Canal by 2014. The widening will
allow large cargo ships that currently anchor in California and use trucks or
the railroad to move goods to the East Coast to sail directly to New Jersey….To
prepare for an influx of larger ships, the Port Authority of New York and New
Jersey plans to raise the Bayonne Bridge by 2016. [The Port Newark Container Terminal]
agreed to invest $500 million in capital improvements.”
Other ports on
the East and Gulf coasts are also investing in port, rail, road and warehouse
construction, while West Coast ports and railroads are trying to improve
transfer and delivery times. “Union Pacific plans to invest approximately $3.3
billion in capital during 2011,” the firm reported in a Sept. 22 press release.
“Bridgestone
Corp. said [Sept. 21] it plans to spend $1.1 billion to expand an existing
auto-tire plant in [Graniteville,] South Carolina and build a new factory
nearby to produce tires for heavy, off-road vehicles,” theJournalreported Sept. 22. “The announcement highlights an ongoing move by auto-related
companies choosing to manufacture in the U.S. with an eye to exporting
elsewhere after years of moving operations out of the country in search of
cheaper labor in other parts of the world.”
“Some say…the
Bakken shale formation, a 15,000-square-mile oil field straddling North Dakota
and Montana and producing 300,000 barrels per day of crude oil…expected to
increase to 1.2 million barrels per day by 2015” is “the biggest construction
project in the U.S. - a job requiring $8 billion in rail and fuel terminals,
oil pipelines, natural-gas plants, oil wells, highway upgrades, water
distribution systems and more,”Engineering News-Recordreported Sept. 19. “The number of construction projects, speed of growth and
cold-climate challenges are mind-boggling.”
Click
here
to register for the complimentary webinar “Flat, Down or Up? Where is
Construction Heading?” Oct. 13 with Ken Simonson,
American Institute of Architects Chief Economist Kermit Baker
and Reed Construction Data’s Chief Economist Bernard Markstein.