Amid Construction Industry Uncertainty, Residential Sector to Fair Well, Experts Say

May 25th, 2012 by DWM Magazine

Residential construction will increase throughout this year and 2013 according to two experts who provided forecasts for the overall industry during a webinar, “The Outlook for Materials, Equipment & Labor Costs,” held this week.

Kathryn Thompson, co-founder and senior research analyst of the Thompson Research Group (TRG) and Ken Simonson, chief economist at the Associated General Contractors (AGC) of America, addressed major concerns of the construction industry but were slightly optimistic in regards to the residential sector.

According to Simonson, residential spending will increase 5 to 15 percent and construction spending will increase 5 to 12 percent. Simonson says material costs will increase 4 to 9 percent and labor costs will increase 1.5 to 2.5 percent. The trends for 2013 to 2012 include increases in construction spending, material costs, labor costs and bid prices.

“Power, manufacturing, warehouse or distribution, and hospital sectors will grow in addition to apartments,” he says. “But single-family construction remains a mystery and federal, state, and local cuts will continue.” He adds that material costs will not be extreme.

Simonson says as far as a yearly summary, private nonresidential spending will increase 10 to 15 percent in the following sectors: power, pipeline, manufacturing, warehouse, hospitals and possibly higher education. He adds that public spending will flat line or decrease 5 percent with less investment in highways, other transportation, and pre-K-12 education. Additionally, there will be weak state and local spending.

According to Thompson and a TRG study – residential building has increased 8 percent (annual revenue will reach $268, 602) since last year and will increase 10 percent by 2013 (with annual revenue totaling $295, 463). Non-residential construction has increased 7.2 percent since 2011 and will increase 9 percent by next year. Public construction will decrease 2.4 percent by next year but should increase 2 percent from 2012 to 2013.

“While we are seeing incremental improvement in construction, the big caveat is that performance is region- and sector-specific,” Thompson says. “Better performing areas include the following: energy, data centers, healthcare, multi-family, repair and remodel, Gulf Coast, Texas and North Dakota while areas of weakness include public construction such as highways, water, transportation and conservation development.”

 

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