CONSTRUCTION COST TRENDS Central Texas Conference – November 12, 2010.
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Transcript of CONSTRUCTION COST TRENDS Central Texas Conference – November 12, 2010.
CONSTRUCTION COST TRENDS
Central Texas Conference – November 12, 2010
Construction Cost Trends
1. Where have we been?National EconomyCentral Texas Economy
2. Current Conditions3. What Lies Ahead
Where have we been?National
Slowdown began in 2007 Recession Began in 2008
Deeper and longer duration than any recession in the past 40 years
Recession “technically” ended in early 2010
National Economy
Chicago Federal Reserve – National Activity Index
Economic Factors
High Unemployment Stimulus Package High Federal, State and Personal Debt Unstable Financial Markets
Tightened Lending Foreclosures
Higher Taxes? Uncertainty of Federal Government Policies Reduced Consumer Spending
Official US Bureau of Labor Reported RateOfficial Rate + Short Term Discouraged
WorkersOfficial Rate + Short and Long Term
Discouraged Workers
Unemployment
Construction Spending Trends
Source: Census Bureau construction spending reports $ in Billions
Stimulus Package
$787 Billion
Stimulus Package
High Debt
What Lies Ahead
Central Texas
Recession started 1 year later than nation Depth and Length will be shorter Forbes: Austin and Washington DC tied for
top spot surviving the recession 1.7m population – up 6.9% What Texas didn’t have - Housing Bubble /
Bust Samsung will soon represent $9B foreign
investment – largest in Texas history Central Texas School Bond Activity
Business Cycle
Commodity and Material Inventory
•Short Term • Inventories Drying up• Demand Low• Dollar Value low in relation to foreign currency
Predictors of construction demand
Architecture Billings Indexes
(50=balance bet. higher and lower billings)
Source: American Institute of Architects (billings) , BLS (employment)
Lack of Confidence in US Government Policies Additional Federal Spending ? Tax / Policy Changes?
Slowing Growth in China Currently a very high 9% – not a sustainable rate long
term Rapid drop would affect US exports and manufacturing
Instability of State’s Financial Situation Unfunded mandates (pensions, benefits, etc.) Will affect personal spending
European Debt Crisis Austerity Programs have cut spending dramatically Bond defaults could trigger interest rate increases
Source: Jim Haughey, Reed Construction Data Chief Economist
Risks to Recovery in 2011-2012
Caution Ahead
High Risk Environment Under pricing Work
Hoping for turnaround GC and Subcontractor Failures
Likely higher in 2011 Default Claims Profitable Backlog has been worked off Close doors and wait it out?
Double Dip Recession??
ENR National Building Cost Index
When will costs begin to rise again – how much?
AGC Materials costs: +3% to +8% Labor costs: +2.5% or less
Reed Commodities +5% to 6%
ABC Total Costs +3% to 6%
Contingency Needed
Sources
Anirban Basu, ABC Chief Economist
Ken Simonson, AGC Chief Economist
Jim Haughey, RCD Chief Economist
www.abc.org
www.agc.org
www.reedconstructiondata.com
CONSTRUCTION COST TRENDS
Central Texas North Conference – November 12, 2010
Presented by:
Jimmy Disler, Executive Director of Capital Improvements, Leander ISD
Randy Baldwin, Assistant Director of Construction Management, Austin ISD
Marty Burger, American Constructors [email protected]
Grant Hutton, American Constructors [email protected]
