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Construction Trends

Construction Industry to Remain Flat in 2012


McGraw-Hill Construction, part of The McGraw-Hill Companies, released its 2012 Dodge Construction Outlook on Oct. 19, and it predicts that overall U.S. construction starts for next year will remain essentially flat. The level of construction starts in 2012 is expected to be $412 billion, following the 4 percent decline to $410 billion predicted for 2011.




The construction industry has struggled to see recovery take hold over the past couple of years. After plunging 24 percent in 2009, new construction starts leveled off in 2010 and have hovered within a set range during 2011,” said Robert Murray, vice president of economic affairs, McGraw-Hill Construction. “The backdrop for the construction industry is the fragile U.S. economy, which continues to see slow employment growth, diminished funding from federal and state governments, and pervasive uncertainty. In 2012, the top-line numbers are not expected to show much change, but there will be variation within the major construction sectors, with some gains predicted for housing and commercial building assuming the U.S. economy avoids recession.”




One major question facing construction, he said, will be, “Will the U.S. economy be able to avoid a ‘double-dip’ recession?” Murray does not believe that will occur, but the risks are higher now. “There’s still a better than even chance that the U.S. economy will be able to avoid recession through the end of 2011 and during 2012,” he said. “Job growth, while weak, is still taking place. Corporate profits have been generally strong, and firms are sitting on substantially more cash than back in 2008. The banking system is healthier than a couple of years ago, and the volume of commercial and industrial loans (7 percent) is rising once again. Interest rates are very low, and energy prices are now settling back.”




Based on significant research and in-depth analysis of macro-trends, the 2012 Dodge Construction Outlook details the forecasts for each construction sector, as follows:
Single-family housing in 2012 will improve 10 percent in dollars, corresponding to a 7 percent increase in the number of units to 435,000 (McGraw-Hill Construction Dodge basis). This is still a low amount, as the excess supply of homes due to foreclosures continues to depress the market.




Multifamily housing will rise 18 percent in dollars in 2012, including apartment and condominium construction, and 17 percent in units, continuing its moderate, upward trend (13 percent growth in 2011).
Commercial building starts will grow 6 percent in 2011 and 8 percent in 2012. Warehouses (18 percent in 2011, 17 percent in 2012) and hotels (34 percent in 2011, 17 percent in 2012) will see the largest percentage increases, but improvement for offices (–2 percent in 2011, 4 percent in 2012) and stores (0 percent in 2011, 2 percent in 2012) will be modest.




The institutional building market will slip an additional 2 percent in 2012, after falling 15 percent in 2011. Tough fiscal environments for states and localities will continue to dampen school construction (–14 percent in 2011, –9 percent in 2012), and healthcare facilities building will decline 1 percent in 2012 after remaining flat (0 percent) in 2011.




Manufacturing buildings will increase 4 percent, following the 35 percent gain in 2011, as the low value of the U.S. dollar continues to support export growth.




Public works construction will drop another 5 percent after a 16 percent decline in 2011, due to spending cuts and the absence of a multiyear federal transportation bill for highway and bridge construction. Murray does not expect a highway bill until 2013.




The 2012 Dodge Construction Outlook was presented at McGraw-Hill Construction’s 73rd annual Outlook Executive Conference in Washington, D.C. In addition to Murray’s Dodge Construction Outlook presentation, industry experts delivered forecasts for residential building, building materials, labor costs and the economy as a whole, shedding light on these crucial sectors.




Copies of the report can be ordered by going to http://analyticsstore.construction.com/dodge-2012-construction-outlook.html Additional reports and projections are available from McGraw-Hill Construction Research and Analytics: http://construction.com/ market_research.




To watch a video about the forecast featuring Robert Murray, McGraw-Hill Construction’s Vice President of Economic Affairs, visit www.youtube.com/user/McGrawHillConstructn.




September Construction Slips 1 Percent


New construction starts in September receded 1 percent to a seasonally adjusted annual rate of $419.5 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Both nonresidential building and housing fell back after their improved pace in August. Meanwhile, the nonbuilding construction sector strengthened for the second month in a row after weakening in early summer. For the January–September period of 2011, total construction starts on an unadjusted basis were reported at $314.1 billion, down 5 percent from the same period a year ago.




The September statistics lowered the Dodge Index to 89 (2000=100), compared to the August reading of 90.




Nonresidential building in September dropped 13 percent to $131.8 billion (annual rate). The institutional side of the nonresidential market retreated overall, pulled down in particular by a 24 percent drop for healthcare facilities after the 92 percent jump for this category in August. Several very large hospital projects, valued each in the range of $164 million to $385 million, had provided the August lift. While September showed that large hospital projects continued to reach groundbreaking, they were generally smaller in scale than what had been reported in the prior month.




Also falling sharply in September were the public buildings category, which plunged 36 percent, and the amusement-related category, which dropped 22 percent. Cushioning the institutional downturn was a slight 1 percent increase for educational buildings, helped by the start of two large college buildings in Philadelphia and San Diego, with additional support coming from the start of a $79 million high school in Yakima, Wash., and a $71 million high school in Virginia Beach, Va. Church construction in September edged up 6 percent from a low level, and the often volatile transportation terminal category advanced 90 percent, reflecting the boost coming from a $132 million project to rehabilitate and retrofit rail substation and ventilation facilities in Queens, N.Y.




The commercial building categories in September featured large declines for warehouses, down 48 percent, and hotels, down 21 percent. Office construction in September improved 11 percent while store construction also saw greater activity in September, rising 15 percent. The manufacturing plant category fell 45 percent, continuing to retreat from its heightened activity in June and July.




Residential building, at $127.6 billion (annual rate), decreased 2 percent in September. The decline was due to a slower pace for multifamily housing, which fell 9 percent in September after witnessing gains the previous two months. Even with this downturn, the multifamily housing category in September included the start of several large apartment projects. For the first nine months of 2011, multifamily housing was up 10 percent in dollar terms compared to the same period a year ago, due to this behavior by major region: the South Atlantic, up 27 percent; the West, up 24 percent; the Northeast, up 10 percent; the South Central, down 2 percent; and the Midwest, down 8 percent. Single-family housing in September held steady with August, as the pattern of recent months suggests that activity is stabilizing at a low volume after the declines shown earlier in 2011. On a year-to-date basis, single-family housing in dollar terms was down 5 percent from the same period a year ago, due to this behavior by major region: the South Atlantic, down 2 percent; the South Central and West, each down 5 percent; the Midwest, down 8 percent; and the Northeast, down 13 percent.




The 5 percent decline for total construction on an unadjusted basis during the first nine months of 2011 was the result of reduced contracting for each of the three major sectors. Nonresidential building dropped 9 percent year-to-date, as a 16 percent slide for institutional building outweighed a 3 percent gain for commercial building and a 27 percent increase for manufacturing building.



Residential building was down 3 percent year-to-date, the result of the 5 percent slide for single-family housing combined with the 10 percent gain for multifamily housing. Nonbuilding construction fell 2 percent year-to-date, with public works down 18 percent while electric utilities soared 100 percent. By geography, total construction starts performed as follows in the first nine months of 2011 relative to last year: the West, up 8 percent; the South Atlantic, down 4 percent; the South Central, down 6 percent; the Midwest, down 11 percent; and the Northeast, down 14 percent.




Thirty Metro Areas Improved in November


The number of improving housing markets continued to expand for a third consecutive month in November, rising from 23 to 30 on the latest National Association of Home Builders/First American Improving Markets Index, released Nov. 7. The list dropped two metros and added nine new ones: Cheyenne, Wyo.; Corpus Christi, Texas; Davenport, Iowa; Fort Collins, Colo.; Hinesville, Ga.; Lima, Ohio; Monroe, La.; Tyler, Texas; and Williamsport, Pa.




The index identifies metropolitan areas that have shown improvement for at least six months in housing permits, employment and housing prices. The following metros were listed in November:



• Alexandria, LA


• Amarillo, TX


• Anchorage, AK


• Bismarck, ND


• Casper, WY


• Cheyenne, WY


• Corpus Christi, TX


• Davenport, IA


• Fairbanks, AK


• Fayetteville, NC


• Fort Collins, CO


• Hinesville, GA


• Houma, LA


• Jonesboro, AR


• Kankakee, IL


• Lima, OH


• McAllen, TX


• Midland, TX


• Monroe, LA


• New Orleans, LA


• Odessa, TX


• Pine Bluff, AR


• Pittsburgh, PA


• Sherman, TX


• Sumter, SC


• Tyler, TX


• Waco, TX


• Waterloo, IA


• Williamsport, PA


• Winston-Salem, NC





“Texas continues to dominate the list of improving housing

markets in November, increasing its net number of entries to eight and continuing a trend in which energy-producing metros seem to be doing better than the average,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “Meanwhile, the geographic diversity of metros also continued to expand, with Colorado, Georgia and Ohio all represented for the first time. This is further evidence that all housing markets are uniquely dependent upon local conditions, and some are leading the way toward an eventual, broader recovery.”




“The November IMI remains heavily weighted by smaller cities, with Pittsburgh and New Orleans as the only major metros represented,” said NAHB Chief Economist David Crowe. “This is indicative of the tough conditions that continue to prevail across much of the country, particularly in larger markets that have been hit hardest by job losses and foreclosures during the recession and that will take more time to heal. However, momentum is building in pockets of the country where energy and agriculture are the dominant industries and where consistent, measurable improvements in economic conditions are now becoming apparent.”




The two metros that dropped off of the improving markets list in November were Iowa City, Iowa, and Wichita Falls, Texas. These metros experienced declines in their employment and permit data, respectively.




The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metro area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.




Visit www.nahb.org/imi for additional data, tables and a list of 2011 future economic release dates.




Home Builder Confidence Rises Four Points in October


Builder confidence in the market for newly built, single-family homes rose four points to 18 on the National Association of Home Builders/Wells Fargo Housing Market Index for October, which was released Oct. 18. This is the largest one-month gain the index has seen since the home buyer tax credit program helped spur the market in April 2010.




“Builder confidence regained some ground in October due to modest improvements in buyer interest in select markets where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “That said, confidence remains quite low as builders continue to confront overly restrictive lending policies that are discouraging prospective buyers, problems with new-home appraisals and widespread uncertainty regarding federal support for homeownership.”




“This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country as extremely favorable interest rates and prices catch consumers’ attention,” said NAHB Chief Economist David Crowe. “However, it’s worth noting that while some builders have shifted their assessment of market conditions from ‘poor’ to ‘fair,’ relatively few have shifted their assessments from ‘fair’ to ‘good.’ One reason is that builders are facing downward pricing pressures from foreclosed homes at the same time that building materials costs are rising, and this is further squeezing already tight margins.”




Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Any number over 50 indicates that more builders view conditions as good than poor.




Each of the HMI’s three component indexes recorded gains in October. The component gauging current sales conditions rose four points to 18, the component gauging sales expectations in the next six months rose seven points to 24, and the component gauging traffic of prospective buyers rose three points to 14.




Regionally, the West led all other areas of the country with its nine-point gain to 21—the highest HMI score for that region since August 2007. The Midwest and South each recorded four-point gains, to 15 and 19, respectively, while the Northeast held unchanged at 15.




Housing Starts Rise 15 Percent in September


Nationwide housing starts rose 15 percent to a seasonally adjusted annual rate of 658,000 units in September, marking the strongest pace of residential construction since April 2010, according to figures released Oct. 19 by the U.S. Commerce Department. The gain was largely attributed to a sharp increase on the multifamily side, which has been trending upward due to increased demand for rental apartments.




“[These] numbers are very welcome evidence that builders are putting some crews back to work on single-family homes in select markets where economic conditions are improving, and on multifamily homes in places where demand for rentals is on the rise,” said Bob Nielsen, chairman of the National Association of Home Builders and a home builder from Reno, Nev. “That said, extremely tight lending conditions for both building and buying new homes, along with stubbornly high foreclosures that are putting downward pressure on home prices, continue to weigh down new construction and corresponding job growth.” He noted that for every one new single-family home built in this country, three new full-time jobs are created.




“The big gain in multifamily housing production for September was in the wake of a below-trend number in August and in keeping with characteristic volatility in that sector,” said NAHB Chief Economist David Crowe. “However, there’s no doubt that demand for apartments is rising as restrictive mortgage lending policies and concerns about future employment push consumers to pursue rental options.” Meanwhile, Crowe said, “Single-family starts showed a slight uptick for the month, which was right in line with our forecast for the third quarter and in keeping with what builders have been telling us in recent surveys regarding the emergence of improving conditions in select local housing markets.”




Single-family housing starts rose 1.7 percent to a seasonally adjusted annual rate of 425,000 units in September, regaining much of the ground they lost in August. Meanwhile, multifamily starts, which often display substantial swings from month to month, rose 51.3 percent to a seasonally adjusted annual rate of 233,000 units, their highest level since October 2008.




Regionally, starts rose across the board in September, with a 12.7 percent gain in the Northeast, a 9.3 percent gain in the Midwest, a 15.7 percent gain in the South and an 18.1 percent gain in the West.




Building permits, which can be an indicator of future building activity, fell 5.0 percent to a seasonally adjusted annual rate of 594,000 units in September following a big gain in the previous month. Single-family permits held virtually unchanged at 417,000 units while multifamily permits declined 14.5 percent to 177,000 units.




On a regional basis, permit activity was mixed in September, with gains of 4.9 percent and 0.9 percent recorded in the Northeast and Midwest, respectively, and declines of 7.0 percent and 9.0 percent registered in the South and West, respectively.




New-Home Sales Rise 5.7 Percent in September


Sales of newly built, single-family homes rose 5.7 percent to a seasonally adjusted annual rate of 313,000 units in September, according to data released Oct. 26 by the U.S. Commerce Department. This marks the fastest pace of new-home sales in the past five months.




“[This] report highlights the gradual improvement in housing market conditions that is becoming evident in certain pockets of the country, as consumers who can surmount very restrictive lending standards to qualify for a favorable mortgage rate seize on this opportunity to buy,” said Bob Nielsen, chairman of the National Association of Home Builders and a home builder from Reno, Nev. “The latest numbers also reveal that first-time buyers are driving the new-homes market right now, as evidenced by the volume of lower-priced, entry-level homes under contract. It’s worth noting that these consumers are very dependent upon federal policies and programs that support homeownership, such as the mortgage interest deduction and low-downpayment mortgage options that have been threatened by recent government proposals.”




“The improved rate of new-home sales in September is on par with NAHB’s forecast for the overall number of sales this year and in keeping with the spotty improvements that our latest builder surveys have highlighted in select markets,” said NAHB Chief Economist David Crowe. “While 313,000 is still an exceptionally low rate of new-home sales by historic standards, it is an encouraging sign of an anticipated broader recovery over the course of next year, and builders have helped the situation by keeping their inventories of homes for sale very lean in areas where there is an oversupply of existing units.”




Regionally, new-home sales were mixed in September, with gains of 11.2 percent and 9.7 percent registered in the South and West, respectively, and declines of 4.2 percent and 12.2 percent registered in the Northeast and Midwest, respectively.




The inventory of new homes for sale held at an all-time record low of 163,000 units in September. This represents a modest 6.2 -month supply at the current sales pace.
Contractors Squeezed by Construction Materials Price Hikes in Last Year
Although the amount contractors pay for a range of key construction materials held steady in September, the cost of materials climbed 8.1 percent from the year-earlier level.




According to an analysis of producer price index figures released by the Associated General Contractors of America, the price contractors charge for new nonresidential building construction edged up only 2 to 3 percent over 12 months, depending on building type.




“Feeble demand for construction is forcing contractors to absorb the bulk of materials price hikes, instead of passing them along to owners,” said Ken Simonson, AGC’s chief economist. “This pattern has persisted for more than two years, and many contractors are increasingly at risk of going under.”




“These prices can spike anytime there is a global supply disruption or a consensus that demand is strengthening worldwide, not just from U.S. construction,” Simonson explained. “In contrast, materials produced here and used only by U.S. construction have shown little price movement.”




Simonson observed that the price index for new construction—what contractors charge for construction projects—rose 2.2 percent over 12 months for industrial buildings, 2.6 percent for offices, 2.8 percent for warehouses and 3.0 percent for schools. “In light of the much steeper materials cost increases, these gains are not enough to keep contractors solvent,” he warned.




Armstrong Acquires Simplex Ceilings


Armstrong World Industries, Inc., Lancaster, Pa., announced Nov. 4, 2011, that it has acquired Intalite Inc., operating under the name Simplex (“Simplex”) and based in Montreal, Quebec, Canada. Terms of the purchase were not disclosed. Simplex will become part of the Armstrong Building Products division.




Simplex designs, develops and manufactures specialty metal ceiling systems for a range of market segments and applications, with sales primarily in the United States and Canada.




ClarkDietrich™ Building Systems Acquires Vinyl Corp.


ClarkDietrich™ Building Systems, West Chester, Ohio, announced Nov. 1, 2011, that it has purchased the Vinyl Corp. business from Worthington Industries, Inc. Located in Miami, Vinyl Corp. is one of the largest, full-line vinyl bead and trim manufacturers in the United States.




ClarkDietrich has begun executing the planned integration of the two companies’ products, customers and employees. Vinyl Corp. currently has 34 employees.




USCIS Redesigns Employment Authorization Document and Certificate of Citizenship




Citizenship and Immigration Services Director Alejandro Mayorkas announced Oct. 25 the launch of an enhanced Employment Authorization Document and a redesigned Certificate of Citizenship (Form N-560) with new features to strengthen security and deter fraud.




As part of USCIS’s ongoing efforts to enhance the integrity of the immigration system, the state-of-the-art technology incorporated into the new documents will deter counterfeiting, obstruct tampering, and facilitate quick and accurate authentication. USCIS began issuing the new EADs Oct. 25 and will begin using the redesigned certificates on Oct. 30. The agency anticipates that more than 1 million people will receive the new documents over the next year.




The new features of the EAD will better equip workers, employers and law enforcement officials to recognize the card as definitive proof of authorization to work in the United States.




USCIS worked closely with the Immigration and Customs Enforcement Forensic Document Laboratory to incorporate technology and tactile features in order to deter fraud and facilitate card authentication.




Additionally, USCIS employs a new and more secure printing process for its redesigned Certificate of Citizenship that renders the certificate more tamper-proof.




Although the look and feel of the documents is new, the manner in which an applicant applies for and receives them will not change. USCIS will replace EADs already in circulation as individuals apply for their renewal or replacement. All previously issued EADs remain valid until the expiration date printed on the card. Previously issued Certificates of Citizenship remain valid indefinitely.




NWCB Is Looking for Outstanding Projects


Nominations are now being accepted for the Northwest Wall & Ceiling Bureau’s 2012 Outstanding Project of the Year Awards. Wall and ceiling projects can be nominated in the following categories: interior (residential or commercial); exterior (single family or multifamily); suspended ceiling (acoustical); light-gauge steel framing; and renovation/restoration.




The projects nominated must have been completed in the past two years. Projects that have been previously nominated but not selected for an Outstanding Project of the Year Award by NWCB may be resubmitted. The wall and ceiling subcontractor on the job must be a member of NWCB. Anyone can nominate a project.




The nominations deadline is Feb. 10. The entries need to be complete with a filled-out nominations form, high-quality photos and attached description on the project. All of these components are critical as the winning entries will be featured in print and online media.




Download the nomination form and a complete set of rules by going to www.nwcb.org.




People in the News


Matt Kohler has joined Topcon Positioning Systems, Livermore, Calif., as a regional sales manager for the Construction Business Unit. Kohler has extensive knowledge of the construction industry, including experience in machine control sales, distributor management and sales channel development.




Rick Fedrizzi, president, CEO and founding chairman of the U.S. Green Building Council, has been elected chairman of the World Green Building Council. The WorldGBC is a coalition of green building councils from 89 countries around the world.




Part of Fedrizzi’s plan as WorldGBC chair is to raise the global awareness of the WorldGBC while at same time advancing the voice of each country and region.




Founded in 1999, WorldGBC fosters and supports new and emerging green building councils by providing them with the tools and strategies to establish strong organizations and leadership positions in their countries.




Fedrizzi, who was USGBC’s founding chairman, was appointed president and CEO in 2004 following a 25-year career as a Fortune 500 executive. Under his leadership, USGBC has tripled its membership and broadened its influence through efforts such as its LEED green building program, the International Greenbuild Annual Conference & Expo and the LEED Professional Credential program.




Companies in the News


Leica Geosystems Canada has welcomed Atlas Machinery Supply Ltd. as an authorized dealer for its construction tools and precision tools product lines.




Flex-Ability Concepts, manufacturer of curve-able metal track framing products, has relocated to expanded quarters in Oklahoma City. The 90,000 square-foot facility includes manufacturing, distribution and administrative areas.




The new facility is located at 5500 W. Reno Ave., Oklahoma City, 73127. Telephone numbers remain unchanged.




CEMCO has secured a facility outside of Ft. Worth, Texas, to better service Texas and the surrounding markets. Full-scale manufacturing began in early November and was overseen by newly promoted operations manager Chad Rodgers, who came to the new facility from CEMCO’s Denver plant. Leading the sales efforts is regional sales manager Craig Baldwin who has handled the Texas market for CEMCO over the past few years. Joining Baldwin is CEMCO’s newest hire, Rocky Thomas, an experienced sales professional previously based in Denver. Inside sales will be handled by newly hired Justin Miller, who will be relocating from Southern California.




New on the ’Net


Designing curved surfaces is now greatly simplified, thanks to an expanded “Applications & Details” section (under the “Support Center” tab) on the Radius Track website at www.radiustrack.com. The site features an assortment of curved construction applications, including interior walls, curtain walls, headers, ceilings, roofs, domes and knife edges, followed by specific detail drawings for each application. These drawings can be downloaded in .pdf, .dxf or .dwg formats.




AGC Glass Company North America has unveiled its completely redesigned corporate website, www.us.agc.com. Featuring a contemporary look, improved navigation and expanded resources, the new site is designed to make it easier for AGC customers to find the right glass for the right application.

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