To construction professionals dealing with the most wrenching economic downturn in decades, it’s the kind of sound a drowning man hears when a lifesaver hits the water:
The U.S. construction market in 2010 will see public works construction rise by 14 percent, multifamily housing construction spending improve by 16 percent in dollars (14 percent in units) and single-family home spending rise by 32 percent.
That forecast from Robert Murray, of industry news authority McGraw-Hill Construction, came in an address in October to more than 300 industry leaders, architects and engineers at a conference in Washington. Across a range of construction disciplines, Murray suggested, there is light at the end of the tunnel.
What’s unknown is how many construction players will be around to bask in that light when it gets here. Consider:
Construction employment nationally declined by 62,000 in October, according to the Bureau of Labor Statistics. Even during the peak May-September construction season, monthly job losses averaged 67,000. That’s well down from 117,000 per month from November to April, but still headed in the wrong direction.
Since December 2007, construction employment in the U.S. has fallen by 1.5 million, and by 10.3 percent in Kansas City over the past year. The unemployment rate for the U.S. construction industry is at 17.1 percent, nearly twice the overall rate nationally. Some in the industry fear the jobless rate in construction could double within the next six months.
And even with the improvements in areas he cited, Murray still expects declines next year in spending on manufacturing buildings (down 14 percent), commercial buildings (off 4 percent) and institutional buildings (off 2 percent in square footage).
Against that backdrop, it may be tough to remain optimistic, but builders like Phil Thomas are willing to give it a shot.
“We have opportunities where people haven’t built, not because they don’t have the money or can’t, but because it wasn’t the right message to send to their customers or congregations,” said Thomas, president of A.L. Huber Construction. “As things turn around, and it looks like it is OK to go ahead and start on your plans for growth, that will change. It’s a great time to buy construction, because prices are so competitive, and material prices are cheap.”
The bottom line for him? “I think when things start to turn, they’ll turn pretty quickly,” Thomas said.
Looking over the horizon, a task made easier by the lack of clutter from short-term projects, Thomas sees the second half of 2010 as the turning point. Until we get there, Huber is redoubling in-house efforts to make sure current customers are thrilled with their outcomes, leveraging that satisfaction into new project referrals, and preparing staff for the eventual turnaround.
MOVING DIRT
One measure of how tough things have been: Roger Neighbors’ father started Neighbors Construction Co. in 1951, and since its first general contracting job in 1968, the company has never seen a year without a new project start. Until 2009.
“We’ve had no new starts this year, for the first time ever,” Neighbors said. “We’re working the backlog, and finishing up what we’ve got.”
Good fortune or good timing—maybe both—have intervened on his company’s behalf; he hopes to keep the annual job-starts string alive by starting construction by December, possibly yet this month, on a 263-unit apartment complex in the Northland. That $23 million project with Briarcliff Development comes as welcome relief for Neighbors, whose staff is at historically tight levels.
A job like that gives him reason for hope going forward.
“We used to have these quite often, one or two at a time for several years,” Neighbors said, “but for this year, that’s a good sign. We’re dealing with other clients lining up to do something next year, so it feels that the climate is favorable for next year for construction, at least on the apartment side.
“It seems like there’s a little more activity lately; we’re getting a lot of calls, even more just today, asking about business and things to build than we’ve had,” Neighbors said. “That’s encouraging.”
A FEDERAL INFLUENCE
Don Greenwell, president of the Downtown-based Builders’ Association, said he thought the greater likelihood was that recovery for general contracting would be under way in 2011, since that sector tends to revive roughly 18 months after the housing industry.
“So as for a light at the end of the tunnel, for commercial construction, it does look like the homebuilding market seems to have stabilized, even if the growth there is fairly minimal,” Greenwell said. “We know that we’ll have a tough 2010; our attention continues to focus more on what 2011 will bring.”
Much of that attention will be on four large-scale federal projects either proposed or already approved in the region: the $673 million National Nuclear Security Administration plant in south Kansas City, the $451 million National Bio-Agriculture Facility at Kansas State University in Manhattan; the $334 million Army hospital being built at Fort Riley; and a new $175 million headquarters for the General Services Administration, planned for Downtown Kansas City.
“That’s nearly $2 billion in construction that equates to nearly $7 billion in overall economic impact” on the region, Greenwell said. And that work won’t fall to a mere handful of big general contractors; mid-size and small specialty subcontractors will reap the benefits, as well. To the extent ground is broken on those projects within the next year, he said, a solid work floor is being developed to carry builders into a broader recovery in 2011.
In the meantime, he said, “certainly we’re seeing, across the board, firms that are looking at workscopes broader than their traditional niche. They’re looking at other kinds of construction segments, they’re looking more broadly geographically and traveling to do projects where they may have stayed home at more before. And we’re seeing that come into our market, as well.”
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