AWCI Board Members Report

July 2016

On the agenda of the board meeting of the Association of the Wall and Ceiling Industry is an item called “Regional Reports.” Members of the AWCI board of the directors come from all over the world, and twice each year, they provide an update on the construction picture in their particular region of the United States (and beyond). The following is taken from the minutes of the meeting held April 17, 2016, in New Orleans during AWCI’s annual convention.

Northeast/Mid-Atlantic
Directors from the Northeast/Mid-Atlantic region of the United States reported that Philadelphia is experiencing a building boom, which has been led by health care and education for the last four or five years. The residential sector continues to be strong.
    
New Jersey is not as strong as Philadelphia and New York, but it is still strong.
    
New York is experiencing an extreme building boom. Hudson Yard, Roosevelt Island and the World Trade Center projects are strong. Like Philadelphia, institutions of higher learning and health care are driving the momentum. New York isn’t experiencing any labor shortages yet, but there seems to be lots of competition for estimators and project managers. This is indicative of shortages on the horizon.

Mid-Central
The Mid-Central directors said St. Louis and surrounding areas are strong. Residential sales and permits are still trending upward. A 12 to 15 percent increase is expected in Missouri this year. Commercial and industrial construction are expected to remain positive throughout the district. Health care, student housing and private universities are some of the reasons for this positive growth. Contractors continue to have a steady backlog, and there are more opportunities for future work.
    
The area is experiencing a labor shortage, but there are also more opportunities for future work. Contractors are starting to see some labor impacts as pools of available workers are getting smaller.
    
The Architectural Billing Index for the Midwest is at 49.3, which is slightly down from the last report of 56.2. On the distribution side regarding gypsum footage for the market, the area finished only 1 percent up in 2015, but the rest of this year is looking forward to a 3 to 6 percent increase.

Northwest
The Northwest directors reported that some sectors of the Northwest are improving, and the differences are showing among the three different markets of the Northwest.
    
The actual available trained labor force in the Seattle market is currently 70 to 75 percent of what it was in 2008, and in Oregon, there are slightly more people than there were in 2008. Today’s available labor is not going to be sufficient to meet the upcoming needs, and union halls are fairly empty, said the directors added that the unions are working hard to train new apprentices and recruiting from other areas.
    
Oregon is not doing well with commercial and industrial construction; multifamily is the only thing keeping construction going in that area. Early 2016 is particularly slow as 2015 projects are finishing and 2016 projects are only just starting to come out. Projections for 2016 and 2017 are creating very strong backlogs that may not be able to be met with the projected labor supply they will have, both in the field and in the offices.
    
In Seattle, peak hours that were seen in 2008–2009 have not been approached, but the value of construction is higher than its peak in 2008–2009. Today’s labor force, however, doesn’t match 2008 levels. Commercial hours by the end of 2016 are expected to rise fairly dramatically.

Southeast
The directors from the Southeast portion of the United States reported that Florida is doing well, but there are still major failures on stucco job sites, some of them in the multifamily sector. In Miami, the high-end mark is down, indicating that the height of the market has stalled. The first quarter of 2016 is down, but inventory is up 33 percent. In some areas, land is too expensive, and all the work is going north.
    
In Miami and New York, it was reported that there is a new “law” regarding blind LLCs due to concerns about money laundering.
    
The next report highlighted Puerto Rico’s biggest problem: Puerto Rico has defaulted on bond payments and had bailouts, and now it is trying to declare bankruptcy. The country raised taxes to 11.5 percent (it was previously 7 percent) and added a new service charge for business-to-business transactions. That has impacted a lot of people who may have wanted to invest in the island.
    
Some of the work that would have been in Miami may have gone to Puerto Rico due to financial breaks for businesses. The only thing that was accomplished, the directors said, is that it attracted people to come investigate, but they would end up only buying housing at a discount.
    
The federal government has stopped a lot of investment in Puerto Rico, and that has made the situation worse. In better times, about 60 percent of the available Puerto Rican population was working, and today it is 40 percent. Puerto Rico’s recession started about two years before the recession on the mainland started, and now about 10 percent of the population has left Puerto Rico in the last 10 years to try to find more work.
    
In Puerto Rico’s commercial construction sector, there is some work in the remodel of existing malls due to ownership/name changes, but nothing of any major significance. The industrial market is at a standstill, and the pharmaceutical industry is on hold. Most of the construction work is in the hospitality sector.

Southwest
For the Southwest, the directors said Colorado unemployment is at 4.2 percent. Multifamily and apartment buildings are starting to slow down. Single-family housing is projecting a 4 to 6 percent increase over 2015 and remain consistent in 2016, and commercial is projecting an 8 percent increase over 2015. GCs are declaring backlogs into 2017, he said, but labor is extremely tight and labor rates continue to increase. Light-gauge steel, load-bearing projects are starting to gain traction throughout the Denver metro area. Colorado should be consistent through this year and 2017, and a slowdown will start in 2017.
    
Oklahoma will be flat for the rest of 2016, but there will be slight growth into 2017.
    
In Texas, unemployment is at 4.6 percent and labor pressures still remain high. Qualified help is hard to find, if not impossible to find. They’re starting to see general contractors take subs’ foremen and superintendents.
    
Houston lost a couple of proposed office towers and will be flat for the rest of 2016; however, the area should see growth in 2017. Austin and Dallas–Fort Worth are still showing strong growth for the rest of 2016 and 2017. San Antonio will be flat for the rest of 2016, but strong growth is projected in 2017.

West
The Western directors reported that work hours in Hawaii are up about 12 percent over last year at the same time. The carpenters’ and tapers’ unions are doing a good job of recruiting apprentices; although it is tight, there are no workforce shortages.
    
There is private sector work on Oahu thanks to a shortage of residential units to be built over 10 years. The west side is looking at a shortage of residential units, and two big shopping center projects are going up.
    
In the downtown/waterfront area, more than 30 condo projects, both mid- and high-rises, are on the books. A shopping center did a 650,000 square foot expansion that finished in February; it was lots of tenant improvement work. Waikiki is developing an international marketplace—345,000 square feet of retail. One director reported that his company has TI work at five or six jobs a week. These jobs are tying up a lot of smaller contractors.
    
The Neighbor Islands are not doing so well. Maui is probably the only one with a significant construction market thanks to a couple of new hotels and resorts. There is public sector work, but that is mostly trying to catch up on a lot of backlog over 10 years. Universities, community colleges and education facilities are keeping some subcontractors busy.
    
The $6.5 billion rail project is in its second year. It is projected to be $800 million over budget, and it is two years behind schedule. They are building in an old cane field, and they haven’t even started building any stations.
    
Military spending throughout the state for 2016 is roughly $4.7 million.
    
Reports from California highlighted a high degree of market activity and opportunities. California has three primary markets: San Francisco, Los Angeles and San Diego, and all three are seeing quite a bit of activity. Big projects are coming up: the Apple and Google projects in Northern California, the Wilshire Grand Tower in downtown LA, the remodel of Los Angeles Memorial Coliseum, USC infrastructure development, and the NFL’s Los Angeles Rams are coming to town, so a stadium will be built.
    
In general, commercial construction is up 10 percent over 2014, and 2014 was up over 7 percent higher than 2013. The largest sectors are in lodging, office and commercial retail.
    
With all the activity in both union and open shop markets, there is a labor shortage.
    
As reported, Nevada can be defined as two areas: Reno and the Las Vegas strip. Las Vegas, which can be a volatile market, had been anemic, then it had a surge, but it is now dropping off. Reno is showing progress and seeing more activity.

National
From the directors whose companies market products nationally, they reported that the United States had 35 percent unemployment in 2008, but now it is 14 percent. This means the architects are busy.
    
A trend being noticed is more building information modeling. Although they are seeing just minor shifts, this is significant for our industry. More requirements for BIM are showing up in contract documents. BIM provides a faster process because everything is ready before the building goes up. There is very little paper. It was suggested that everyone dedicate someone in their company to learning BIM and getting them up to speed.
    
Another trend is the drywall contractor being required to locate all electrical items.
    
Canada is doing very well with high-rises in Vancouver and Toronto.
    
Another director said that as for market strength, things are less regional and going more national. The AIA says 2016 is up 8.3 percent for nonresidential, and it will also be up in 2017. According to a speaker at a meeting of the Steel Framing Industry Association, dumping cases will impact pricing at the mill level and the availability of steel. Just as the market adjusts, China has increased its capacity as a country by more than 526 percent since 2000; they used about 44-45 percent of the steel made in the United States. This will have a severe impact on pricing and availability. Mill pricing is up versus the record low in the fourth quarter 2015. Manufacturers need to manage supply, he said.
    
It was further noted that BIM activity and complexity are really picking up.
    
Another director reported that the “big ceiling guys are happy.” He said this means that the small, specialty contractors are happy. There are 440 airport projects going on in North America today. New stadium construction and also the “upfit” of suites on other stadiums are providing work. University work is good. Work is out there.

International
Outside of North America, the directors reported that a lot of construction is going on everywhere. The low interest rates and the threat of negative interests help the building industry in Europe except in France, Belgium and Italy. All other countries are doing well, with the United Kingdom and Poland doing very well.
    
The Russian currency dropped more than 50 percent, yet the building industry dropped only 15 percent.
    
Countries in South America, except Brazil and Argentina, are doing well. The Mediterranean countries are also doing well, as is Asia.