Editors Message
Modest Optimism
Examining the U.S. Construction Industry with Market Guru Mark Bridgers
If infrastructure is the engine to the construction economy, then 2012 will see little acceleration overall. As one sector sees spending speed up, another sector sees it slow down. For 2012, private nonresidential construction segments like power, energy and manufacturing facilities are seeing impressive growth (along with apartment and health care construction), but government spending is drastically shrinking, and important funding like the Highway Bill remains in perpetual limbo. But even as our economic engine struggles to find the right gear, forward-thinkers still feel we’re driving in the right direction.“There is room for modest optimism in 2012 and beyond,” assures Mark Bridgers, a construction industry consultant for nearly 20 years and a principal at Continuum Advisory Group (a leading advisor to the residential, utility and infrastructure construction industry). “The Mayan calendar abruptly ends on December 21, 2012, but does that mean it’s the end of the world as we know it? No. Instead, there are lots of positives to talk about, and regardless of the Mayan calendar, we will exit 2012 intact.”
According to Bridgers, we can look forward to a number of reassuring market conditions in 2012 that range from declining U.S. unemployment to increasing competitiveness of U.S. exports to the lowest borrowing and financing costs and interest rates we might ever see. His crystal ball says we’ll see some aggressive owners accelerating capital construction activity into 2012 and 2013 to get ahead of labor, material and borrowing cost inflation, and there will be some increasing capital construction spending in the utility sectors, due primarily to a combination of regulatory and environmental compliance, deferred maintenance and aging infrastructure. The real bright spot will be the energy sector.
“The shale oil and gas finds in the United States are going to transform the U.S. energy and process manufacturing landscape in ways that are hard to envision,” says Bridgers. “Several potential outcomes include the U.S. exportation of liquefied natural gas, a domestic steel pipeline manufacturing resurgence, a domestic plastic pipeline manufacturing resurgence and a refinery and chemical processing facility resurgence. The surge of high-paying exploration, engineering, construction and manufacturing jobs are going to create dramatic growth in construction spending.”
Unfortunately, those bright spots will be dulled by other construction category outlooks — like a flat recovery in homebuilding. Residential real estate remains weak, weighed down mostly by sluggish single-family housing construction. Credit conditions continue to restrain the housing recovery, and builders are struggling against what they call a flawed appraisal process. The silver lining seems to be multifamily construction, with organizations like the National Association of Home Builders reporting consistent improvement in multifamily housing starts in 2011 and beyond.
Other growing markets include lodging, office and health care construction, and further struggles include the two largest public construction categories, highways and educational construction. Challenges linger, but the U.S. economy will continue to progress forward, provided pros can adapt to this new economic road map. “Access to these opportunities and the greatest benefits will be found with firms that figure out how to reevaluate their tactics in 2012 and 2013,” says Bridgers. Each issue of Compact Equipment in 2012 will be aimed at helping contractors build that toolbox of tactics.
Keith Gribbins
Managing Editor
kgribbins@benjaminmedia.com
