CED

August 2014

Issue link: http://read.dmtmag.com/i/358154

Contents of this Issue

Navigation

Page 39 of 67

38 | www.cedmag.com | Construction Equipment Distribution | August 2014 Construction Overview before. In part, the boom reflects the upsurge in hiring. From 2011 through 2013 nonfarm payroll employment increased at a rate of 180,000 to 190,000 per month, seasonally adjusted. In the first half of 2014, hiring accelerated to a pace of 230,000 and total nonfarm payroll employment has finally exceeded its prerecession peak. Although the Census data don't distinguish between new office construction and renova- tions, anecdotal evidence suggests that the latter is predominating. New headquarters and "spec" office buildings are springing up in a few locations, notably Houston, Silicon Valley, San Francisco and Seattle. But most cities – and especially their suburbs – are still experiencing high vacancy rates and a dearth of new office projects. Instead, employers and landlords are renovating existing buildings to put more employees into cubicles or shared space for days that they aren't telecommuting or working in the field. Law firms are eliminating libraries, and all types of employers are moving files and computer rooms to the "cloud." These trends mean new office construction is likely to remain subdued for at least another year. :DUHKRXVHDQG/RGJLQJ Two smaller niches that have performed well so far this year are warehouses, up 31 percent year-to-date through May, and lodging (hotels), up 19 percent. Both are expect- ed to remain strongly positive. The shift in consumer buying from stores to online purchases has spurred a frenzy of warehouse construction as online vendors attempt to provide same-day or next-day delivery to more customers. These facilities range from massive, 1- to 2-million-square-foot fulfillment centers near long-haul transportation routes to small but modern struc- tures inside metro areas. Another driver for warehouse construction is the Panama Canal expansion. Once that work is completed , currently expected in 2016, so-called post-Panamax containerships will be able to unload three times as many containers at East and Gulf Coast ports as can now fit through the canal. Accom- modating these loads will require much greater warehouse space, as well as storage and marshaling yards for the containers and trailer chassis that haul them. While online buying has created demand for warehouse construction, it has also depressed the much larger retail construction segment. Very few new shopping malls, strip shopping centers or big-box stores are being built. Instead, retail construction is largely limited to space in the first floor of new multifamily housing, hotels and offices, or to renovations and tenant improvements. Even Wal-Mart is reportedly opening more 10,000- to 40,000-square-foot stores this year than 200,000-square-foot superstores, its previous typical size. Health care construction is a category that flourished before the recession but has yet to come back. Hospital construction shrank 12 percent year to date through May. One reason may be uncertainty over how the Affordable Care Act will affect hospital utilization and reimbursement rates once it is fully in effect. Additionally, hospitals are losing lucrative business to standalone emergency centers, outpa- tient surgical facilities, and nonurgent care clinics in grocery, drug and big-box stores. These trends are likely to hold down hospital spending for at least another year. +LJKZD\6SHHG%XPS The two biggest public segments – highway and educational construction – face bleak near-term prospects. Nearly half of highway and street construction has been funded by the federal Highway Trust Fund. Revenue for the fund comes principally from an 18.3 cents-per-gallon gasoline tax. As motorists have switched to more fuel-efficient or non- gasoline-powered vehicles, trust fund receipts have fallen short of spending. For the past several years, Congress has made up for the revenue shortfall by making one-time transfers from the general fund. But there is no consensus this year on how to do that when both political parties have agreed to hold total spending flat and a transfer to the highway account would require a cut in other programs. As a result, the number of new highway and bridge projects could drop sharply over the next year. Educational spending was hard hit by shrinking state and local budgets. Spending on public primary and secondary school construction plunged 46 percent from the high in March 2009 to January 2014 and has recovered only slightly since then. School districts finance much of their construction from property taxes, which reflect house (and commercial property) prices, but with a lag. Although house prices ("Contractors Contend with Uneven Growth But Also Worker Shortages" continued from page 37)

Articles in this issue

Links on this page

Archives of this issue

view archives of CED - August 2014