7/27/2019 Construction Cost Report July 2013

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cassidyturley.com | 1

Construction ReportJuly 2013

Summary

The most recent economic data suggests that private non-residential construction

activity will experience a modest increase during the remainder of the year.

The overall cost of construction increased by +2.5% in July 2013 relative to one year

ago.

The level of commercial real estate construction has trended up over the past 12months.

The cost of petroleum has been rising as recent turmoil in Egypt is reverberating in the

oil markets.

Analysis

Unlike the residential sector, which finally found its growth spurt, private non-residential

construction spending has gained only a little momentum in the 1st half of 2013

registering an average growth rate of 0.4% per month. The good news is that there

have been flashes of increased spending for certain sectors. For instance in May 2013,

spending was up for hotels (25%), office properties (10%) and retail structures (5%)

when compared to the same period a year ago. However, the improvements still are not

widespread regionally. The uptick in construction activity continues to be concentrated

in prime locations like Boston-Cambridge, Houston, Dallas and Phoenix though thereis some evidence of speculative construction beginning to pop up in select areas. For

example, since the recession, markets such as Minneapolis and Louisville have experienced

rent growth and significant declines in vacancy for industrial properties, which lured some

developers off the sidelines. Conversely, public non-residential construction has been

plagued by sequestration. From January to May 2013 federal and state construction outlays

declined 17.0% and 3.7%, respectively, compared to the same period a year ago. This

trend is not expected to change any time soon.

Construction costs are rising. Prices for the bulk of raw materials such as gypsum (17.2%),

lumber (10.3%), glass (3.3%) and concrete products (1.9%) all increased over the past

12 months, while iron/ steel (-7.2%) and copper (-1.1%) posted price declines. According

to Engineering News Record (ENR), the overall cost of construction grew by +2.5% in July

relative to the year ago. Meanwhile, the cost of petroleum has been rising as recent turmoil

in Egypt is reverberating in the oil markets. Petroleum costs soared in June, posting a 4.5%

gain from the prior month. Construction industry labor costs have also been trending up.

Average earnings registered at $25.92/hour in June a 1.7% increase from last year.

The Architecture Billings Index (ABI) that leads construction activity by approximately

3-4 quarters rose 4.3 points from its April reading to 52.9 in May 2013. A reading

above a 50-level threshold indicates construction activity is likely to rise. Incremental

improvement in construction will continue for residential and institutional projects, while

activity for commercial projects will be minimal in most markets. On the contrary, ongoing

sequestration cuts will remain a hindrance to public non-residential construction spending

and activity into 2014.

Modest Rise in Building Activity

Source: U.S. Census Bureau

Non-residential Construction SpendingSA, $Billions

Source: ENR

Source: BLS

Average Hourly EarningsYr/Yr % Chg.

Mo/Mo Yr/Yr

Construction +0.1% +2.5%

Common Labor +0.2% +2.6%

Building -0.1% +1.9%

Skilled Labor 0.0% +1.9%

Materials -0.3% +1.8%

1.7%

2.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Apr2011

Jun2011

Aug2011

Oct2011

Dec2011

Feb2012

Apr2012

Jun2012

Aug2012

Oct2012

Dec2012

Feb2013

Apr2013

Jun2013

Avg. Hrly Earnings: Construction Avg. Hrly Earnings: Total Private

July 2013, % Chg.

ENR Cost Indexes

$250

$255

$260

$265

$270

$275

$280

$285

$260

$270

$280

$290

$300

$310

$320

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

Mar-13

Apr-13

May-1

3

Private Non-residential Public Non-residential

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7/27/2019 Construction Cost Report July 2013

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2 | Cassidy Turley

Construction ReportJuly 2013

Cassidy Turley

2101 L Street, NW

Suite 700

Washington, DC 20037

Tel: 202-463-2100

Project and Development Services

Gary Helminski

Executive Managing Director, Principal

Adrian Conforti

Managing Director, Principal

Construction Jobs Construction Wages

MarketQ2 13/Q2 12

Yr/Yr %Chg

Avg WeeklyQ4 12

Yr/Yr %Chg

Atlanta 3,650 4.2% $1,385 5.4%

Baltimore* 5,970 8.7% $1,406 5.9%

Boston-Cambridge 5,790 7.0% $1,699 6.3%

Chicago -3,530 -2.4% $1,153 -

Denver* 5,450 7.5% $1,458 10.5%

Houston 10,500 5.9% $1,636 5.4%

Indianapolis 1,150 2.8% $1,407 -

LA/Long Beach/Santa Ana 14,090 8.0% $1,365 6.9%

Milwaukee 2,220 9.5% $1,203 6.7%

New York* 9,030 3.0% $1,407 -1.3%

Phoenix 9,850 11.4% $1,390 10.8%

Sacramento -1,880 -5.0% $1,179 -5.7%

San Diego 0 0.0% $1,256 1.0%

San Francisco 7,330 8.5% $1,528 3.5%

San Jose 3,690 10.6% $1,637 6.6%

Seattle 680 0.8% $1,265 3.9%

Tampa 3,340 6.3% $1,054 -4.4%

Washington DC Metro* -1,830 -1.6% $1,208 -3.2%

Select Market Statistics:

* Employment data includes mining and lodging

Source: BLS

Construction Spending

$Billions, SA

Source: U.S. Census Bureau

Producer Price IndexNSA, % Chg.

Apr-13 May-13 Jun-13 Yr/Yr

Concrete Products 0.2% -0.5% 0.4% 2.0%

Copper -5.9% -4.9% 0.9% -1.1%

Glass -0.6% 1.6% 0.2% 3.3%

Gypsum 0.2% 1.1% -0.5% 17.2%

Lumber 2.6% -3.8% -4.4% 10.3%

Petroleum* -5.4% -0.2% 4.5% 1.7%

Iron & Steel -0.4% -2.2% -0.9% -7.2%

Labor Costs

Avg Hourly Earnings $26.04 $25.94 $25.92 1.7%

Avg Weekly Hours 38.7 39.2 39.5 -

Construction Costs

* seasonally adjusted

Source: BLS

Mar-13 Apr-13 May-13

Total Construction $869 $870 $875

Total Private $604 $606 $605

Residential $319 $319 $322

Lodging $12 $13 $13

Office $30 $28 $28

Commercial $44 $45 $44

Manufacturing $48 $48 $44