Gilbane Building Co., based in Providence, Rhode Island, is one of the largest privately held family-owned real estate development and construction firms in the industry. The company just announced the publication of its winter 2012 edition of Construction Economics -- Market Conditions in Construction. Based on an array of economic data, construction starts and material cost trends, this free report indicates an increase in construction spending over last year but cautions of an expected downturn again in early 2013.
“Supported by overall positive growth trends for year 2013, I expect margins and overall escalation to climb more than we’ve seen in five years, particularly in the rapidly expanding residential side of construction.,” says Ed Zarenski, the report’s author and a 40-year veteran of the construction industry.
According to the report, margins are up a slim 1 to 2 percent year over year for 2012. Once 2013 growth in nonresidential work picks up and both residential and nonresidential are active, the industry may begin to see some labor shortages and productivity losses, which will push up escalation. Also, as it did in 2012, even moderate growth in activity will allow contractors to pass along more material costs and increase margins. Potential impact of recent events:
- According to the Associated General Contractors (AGC), Hurricane Sandy may not add any economic impact to the construction industry. For the most part, any funds directed to reconstruction will be diverted from some other potential or previously planned construction project and will be spread over a long time span.
- Bond issues considered in the recent elections amount to just over half ($30 plus billion) of what was approved in 2008 elections ($60 plus billion), signaling a reduction in publicly funded work.
- At the recent McGraw Hill Outlook conference, none of the economists expect the fiscal cliff to happen. However, sequestration or the compromises agreed upon will likely reduce funds available for federal and public projects.
This free report is available for download at http://info.gilbaneco.com/construction-economics.