Construction Report July 2013
Modest Rise in Building Activity
Non-residential Construction Spending SA, $Billions
Summary $320
$285
$310
$280
•
The most recent economic data suggests that private non-residential construction activity will experience a modest increase during the remainder of the year.
$275
$300
$270 $290 $265 $280
•
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 12 months.
•
The cost of petroleum has been rising as recent turmoil in Egypt is reverberating in the oil markets.
$260
Private Non-residential
Apr-13
May-13
Mar-13
Jan-13
Feb-13
Dec-12
Oct-12
Nov-12
Sep-12
May-12
Jul-12
$250 Aug-12
$255
$260 Jun-12
$270
Public Non-residential
Source: U.S. Census Bureau
ENR Cost Indexes
Analysis
July 2013, % 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%
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 there is 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.
Source: ENR
Average Hourly Earnings Yr/Yr % Chg. 2.5% 2.2% 2.0% 1.7% 1.5% 1.0% 0.5%
Avg. Hrly Earnings: Construction
Source: BLS
Apr 2013
Jun 2013
Feb 2013
Oct 2012
Dec 2012
Aug 2012
Jun 2012
Apr 2012
Feb 2012
Dec 2011
Oct 2011
Aug 2011
Apr 2011
Jun 2011
0.0%
Avg. Hrly Earnings: Total Private
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. cassidyturley.com | 1
Construction Report July 2013 Construction Spending
Construction Costs
$Billions, SA
Producer Price Index
Mar-13
Apr-13
May-13
Total Construction
$869
$870
$875
Total Private
$604
$606
$605
17.2%
Residential
$319
$319
$322
-4.4%
10.3%
Lodging
$12
$13
$13
-0.2%
4.5%
1.7%
-2.2%
-0.9%
-7.2%
OfďŹ ce
$30
$28
$28
Commercial
$44
$45
$44
Manufacturing
$48
$48
$44
Apr-13
May-13
Jun-13
Yr/Yr
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%
Lumber
2.6%
-3.8%
Petroleum*
-5.4%
Iron & Steel
-0.4%
NSA, % Chg.
Concrete Products
Labor Costs Avg Hourly Earnings Avg Weekly Hours
$26.04
$25.94
$25.92
1.7%
38.7
39.2
39.5
-
Source: U.S. Census Bureau
* seasonally adjusted Source: BLS
Select Market Statistics: Construction Jobs Market
Q2 13/ Q2 12
Yr/Yr % Chg
Avg Weekly Q4 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%
1,150
2.8%
$1,407
-
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%
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%
Indianapolis LA/Long Beach/Santa Ana
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
Construction Wages
San Diego
Managing Director, Principal
2 | Cassidy Turley
* Employment data includes mining and lodging Source: BLS