Volume 47, Issue 7 - July 2012


Commercial Construction is Turning the Corner

Store construction is back on track for positive growth after a steep decline in 2008 through 2012, according to Robert Murray, vice president, economic affairs for McGraw Hill Construction (MHC). Murray made his predictions during the group’s Outlook Executive Conference, and said that as a whole, news for commercial construction is positive. Murray, who reported that more large-scale architectural projects are reaching the start stage, predicted moderate growth in 2013.

“The level of uncertainty is greater than we have ever seen,” said Murray. “But there are bright spots you can hang your hat on.”

Murray noted 12 large-scale construction projects ranging from $40 million to $400 million in value with an expected commencement year of 2012.

Although Murray’s forecast was positive, challenges still remain including state budget shortfalls that continue to have an impact; for example there are a smaller number of schools being built. He also said slowed construction of office buildings is “problematic” due to tight credit conditions.

Material Matters
When Julian A. J. Anderson, president, Rider Levett Bucknall (RLB), addressed attendees of McGraw Hill Construction’s Annual Outlook Executive Conference he outlined the “good” and the “not so good,” regarding the construction industry. He also talked about construction pricing.

Looking at some construction good news, Anderson pointed out some results of an RLB survey. He noted the survey indicates construction is on the road to recovery in major cities, good industry growth is expected through 2020, interest rates will remain low and continued recovery in the housing industry–with pace even expected to pick up.

The not so good includes a presidential election year which “drags on the recovery.” According to Anderson, results of the elections will have a significant impact on the future speed of recovery and the fiscal cliff also drags on recovery. He also advised attendees to expect bid prices to spike at an activity tipping point and labor and materials prices to continue rising in 2013.

Speaking of total construction cost inputs, he said these include labor, materials (including waste), equipment (including operations and maintenance costs), subcontractors, bonds, insurance and taxes, and overhead and profit. Other factors affecting the price of construction materials include the fluctuating U.S. dollar (compared to the Euro), the “inscrutable” price of oil and the Baltic dry index which is an assessment of the price of moving the major raw materials by sea.
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