Gilbane Construction Economics
Transcript of Gilbane Construction Economics
CONSTRUCTION:WHAT’S UP AND WHAT’S DOWN?
FEBRUARY 2013
ED ZARENSKI, ESTIMATING EXECUTIVE
GILBANE BUILDING COMPANY
401-456-5495
Gilbane Construction Economics
Gilbane Building Company
Construction Economics Overview
New Starts UP slightly
Spending UP slightly
Jobs FLAT to up slightly
Productivity UP slightly
Materials Prices FLAT to up slightly
Cost of Buildings UP
Margins UP
Construction Economics OVERVIEW
Construction Economic Factors Starts up 5% 2012, expect +6% 2013 Productivity up 10% since 2007 Backlog increasing
Jobs still down 28% from peak Public work declining ABI & DMI indicate downturn in Q1’13 – Q2’13
Construction Economics OVERVIEW
Spending up since Q1 20111 but Q3 2012 was down 0.3%
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Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
$ annualized by historical monthly avg
Nonresidential Buildings Spending Rate Growth ($bil)
Construction Economics SPENDING ‘06-’12
Construction spending converted to VOLUMEU.S. Total Construction Spending Summary
totals in $billions adjusted to Dec 2012 U.S. dollarsActual Forecast
2006 2007 2008 2009 2010 2011 2012 2013
Nonresidential Buildings 361 404 421 379 309 292 298 294
% change year over year 5.4% 11.8% 4.3% -9.9% -18.6% -5.6% 2.3% -1.5%
Nonbuilding Heavy Engr 235 260 272 285 283 259 268 26411.7% 10.9% 4.5% 4.5% -0.6% -8.3% 3.5% -1.6%
Residential peak 545 492 405 325 255 248 251 282 321 in 2005 -6.1% -17.7% -19.6% -21.8% -2.8% 1.2% 12.3% 13.5%
Total 1088 1069 1019 919 839 802 848 880
1.0% -1.8% -4.7% -9.9% -8.6% -4.5% 5.8% 3.8%
Residential includes new, remodeling, renovation and replacement.Source: U.S. Census Bureau, Department of Commerce.
Forecast 2013 - GBCo
Construction Economics MARKETS
2013 Construction Spending Forecast‘08 to ‘11 2012 2013
Educational -20% 0% -1% Healthcare -17% +3% +2% Commercial -51% (‘07 to ’11) +6% +10% Office -50% +4% + 9%
Percent of Nonresidential Building Market Educational 28% Healthcare 12% Commercial 16% Office 12% PUBLIC Educational = 80% public & 20% private PRIVATE Healthcare = 80% Commercial = 95% Office = 70%
Construction Economics JOBS
# of JOBS: Peak ––– Bottom ––– CurrentPeak Bottom %Loss Current
CT 69,000 47,000 Aug’12 <32%> 49,000 MA 145,000 102,000 Aug’12 <30%> 106,000 RI 23,400 15,200 Mar’12 <35%> 15,300
Bos/Ca/Qu 64,800 43,800 Feb’10 <33%> 55,200 Sprng/Wrc 23,200 12,300 Feb’12 <47%> 13,400 Prv/FR/War 30,600 14,400 Feb’12 <53%> 17,600 Hartford 23,800 14,000 Feb’12 <41%> 16,700
Construction Economics INDICATORS 2013
New Starts UP
Spending UP
Jobs UP
Productivity DOWN slightly
Materials Prices UP
Cost of Buildings UP
Margins UP
Construction Economics INDICATORS 2013
Construction Economics FORECAST 2013
2013 Construction Spending Forecast
2012 2013 Residential Bldgs +14.6% +14.8% Nonres Bldgs +5.4% + 1.2% Nonbldg Heavy Engr +7.5% +2.0%
but escalation 2012 ~ 3% 2013 ~ 4%
AIA Consensus Nonres Bldgs +5.0%
Construction Economics JOBS
Jobs Growth
1 million jobs to support residential growth Exceeds historical growth rate All construction has never grown that fast Could lead to nonresidential worker shortages
Construction Economics ESCALATION
Building Cost Future Escalation
Total Escalation for 2012 = 3% to 4% Total Escalation for 2013 = 4% to 6% Total Escalation for 2014 = 5% to 7%
Construction Economics RECOVERY
When will VOLUME return to previous levels?
Volume needs to grow 30% Spending + escalation $500+ billion = ~55% Greatest Expansion Ever = 52% in 4 years
Nonresidential Buildings MINIMUM 5 years = 2017 Nonresidential Heavy ONLY 1-2 years = 2013-2014 Residential Buildings MINUMUM 5 years = 2017
Construction Economics RECOVERY
When will JOBS return to previous levels?
Volume regains peak in 2017
As work increases productivity declines
Hiring growth always lags volume grow
Construction Economics SUMMARY
What will future markets deliver? Next few years Reduced workforce but rapidly expanding As work increases productivity declines Increased rate of spendingMaterials cost inflation Spending levels dictate margins
Near-term: competitive bidding environment Long-term: building costs above materials inflation
Construction Economics QUESTIONS
???
Construction Economics RECOVERY
Gilbane Construction EconomicsMarket Conditions in Construction
http://info.Gilbaneco.com/construction-economics-winter-2012
Thank You!
CONSTRUCTION:WHAT’S UP AND WHAT’S DOWN?
FEBRUARY 2013
ED ZARENSKI, ESTIMATING EXECUTIVE
GILBANE BUILDING COMPANY
401-456-5495
Gilbane Construction Economics
Gilbane Building Company