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Construction Trends

Construction Industry to See More Balanced Growth in 2015 According to Dodge Data & Analytics

Dodge Data & Analytics released its 2015 Dodge Construction Outlook on Nov. 6, 2014, and the report predicts that total U.S. construction starts for 2015 will rise 9 percent to $612 billion, a larger gain than the 5 percent increase to $564 billion estimated for 2014.

"The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years,” said Robert Murray, chief economist and vice president for Dodge Data & Analytics. "The economic environment going forward carries several positives that will help to further lift total construction starts. Financing for construction projects is becoming more available, reflecting some easing of bank lending standards, a greater focus on real estate development by the investment community, and more construction bond measures getting passed. While federal funding for construction programs is still constrained, states are now picking up some of the slack. Interest rates for the near term should stay low, and market fundamentals (occupancies and rents) for commercial building and multifamily housing continue to strengthen.”

Based on research of specific construction market sectors, the 2015 Dodge Construction Outlook details the forecast as follows:

Commercial building will increase 15 percent, slightly faster than the 14 percent gain estimated for 2014. Office construction has assumed a leading role in the commercial building upturn, aided by expanding private development as well as healthy construction activity related to technology and finance firms. Hotel and warehouse construction should also strengthen, although the pickup for stores is more tenuous.

Institutional building will advance 9 percent, continuing the moderate upward trend that’s been established during 2014. The educational building category is now seeing an increasing amount of K-12 school construction, aided by the financing made available by the passage of recent construction bond measures. Healthcare facilities are expected to show some improvement relative to diminished activity in 2014.

Single-family housing will rise 15 percent in dollars, corresponding to an 11 percent increase in units to 700,000 (Dodge basis). It’s expected that access to home mortgage loans will be expanded, lifting housing demand. However, the millennial generation is only gradually making the shift towards homeownership, limiting the potential number of new homebuyers in the near term.

Multifamily housing will increase 9 percent in dollars and 7 percent in units to 405,000 (Dodge basis). Occupancies and rent growth continue to be supportive, although the rate of increase for construction is now decelerating as the multifamily market matures.

Manufacturing plant construction will settle back 16 percent, following the huge increases reported during both 2013 (up 42 percent) and 2014 (up 57 percent) that reflected the start of massive chemical and energy-related projects. Next year’s volume remains quite high by recent historical standards.

Eighty-Three Percent of Construction Firms Report Having Trouble Finding Qualified Workers

Most construction firms report they are having trouble finding qualified craft workers to fill key spots as the industry recovers from its years-long downturn, according to the results of an industry-wide survey released Oct. 22, 2014, by the Associated General Contractors of America. Association officials called for new career and technical school programs, as well as other workforce measures to offset the labor shortages.

"As the survey results make clear, many construction firms across the country are having a hard time filling available positions,” said Ken Simonson, chief economist for the Associated General Contractors. "Considering how much the nation’s educational focus has moved away from teaching students career and technical skills during the past few decades, it is easy to understand why the construction industry is facing such severe labor shortages.”

Eighty-three percent of responding firms nationwide are having a hard time filling craft worker positions—on-site construction jobs including carpenters, equipment operators and laborers. Sixty-one percent are having a hard time filling professional positions, including project supervisors, estimators and engineers.

Simonson noted that worker shortages appear most severe in the Southeast, where 86 percent of contractors report having a hard time finding qualified workers. Eighty-four percent of contractors in the Midwest, 82 percent in the West and 67 percent in the Northeast report difficulty finding workers.

The construction economist added that many firms are changing the way they operate to address worker shortages. Forty-eight percent of firms nationally report increasing their use of subcontractors and 37 percent increased their using of staffing agencies. In addition, 59 percent of firms nationally report they have increased wages to help retain construction craft workers and 56 percent have done so to retain construction professionals.

Construction firms seem particularly concerned with the quantity and quality of local construction education and training programs. Nationwide, 55 percent of firms say the local pipeline for preparing new craft workers is below average or poor. Meanwhile, 35 percent of firms have a low opinion of the local pipeline for construction professionals.

More than 1,000 construction firms participated in the survey, which was conducted during August and September of this year.

Single-Family Production Poised to Take Off in 2015

A growing economy, rising household formations, low mortgage rates and pent-up demand will help single-family housing production to rev up in 2015 while a growth in renters will keep the multifamily market at cruising altitude or higher, according to economists who participated in the Oct. 31 National Association of Home Builders 2014 Fall Construction Forecast Webinar.

"Single-family builders are feeling good. They are not overly confident, but confident enough to keep moving forward,” said NAHB Chief Economist David Crowe.

He added that the single-family sector will finish out the year much stronger than it began and set the stage for a robust 2015.

"This is mostly due to significant pent-up demand and steady job and economic growth that will allow trade-up buyers who have delayed home purchases due to job insecurity to enter the marketplace,” said Crowe.

A Bright Outlook

NAHB is forecasting 991,000 total housing starts in 2014, up 6.6 percent from 930,000 units last year.

Single-family production is expected to rise 2.5 percent this year to 637,000 units, increase an additional 26 percent next year to 802,000 and reach 1.1 million in 2016.

Setting the 2000-2003 period as a benchmark for normal housing activity when single-family production averaged 1.3 million units annually, single-family starts are expected to steadily rise from 48 percent of what is considered a typical market in the third quarter of 2014 to 90 percent of normal by the fourth quarter of 2016.

Multifamily starts, which Crowe said are now at a normal level of production, are projected to increase 15 percent in 2014 to 356,000 units and hold steady next year.

Meanwhile, the NAHB Remodeling Market Index, which averages ratings of current remodeling activity with indicators of future activity, matched its all-time high of 57 in the third quarter of 2014 and has been above 50 for six consecutive quarters. A reading above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.

NAHB is forecasting that residential remodeling will post a 3.4 percent decline in 2014 over last year, due in large part to slow activity in the first quarter caused by an unusual harsh winter throughout much of the nation. Residential remodeling activity is expected to rise 2.7 percent in 2015 and an additional 1.3 percent in 2016.

Housing Will Soon Be Undersupplied

Taking an even more bullish outlook, Mark Zandi, chief economist at Moody’s Analytics, said that prospects are good for continued gains in overall economic and housing activity.

"The reason is that job growth is quite strong,” said Zandi. "Currently, we are creating about 225,000 jobs per month, or 2.75 million per year. That is double the pace necessary to reduce unemployment and under employment, which augers very, very well for housing demand and the housing market more broadly.”

With the current supply of housing running just over 1 million units on annualized basis, Zandi said that this figure is well below what is needed for the longer run.

In the aftermath of the Great Recession, new household formations were depressed as the number of millennials living with their parents or doubling or tripling up in apartments soared to about 3 to 4 million above normal, according to Zandi. As the economy continues to improve and these 18- to 34-year-olds begin to form their own households, this will boost overall demand for new housing construction.

"In a normal year, there should be demand for 1.7 million units,” he said, adding that each single-family home generates about 3.5 jobs over the course of a year and every multifamily unit produces 1.5 jobs over the same period.

Taking this one step further, Zandi said that increasing the housing stock by 700,000 units to meet this unmet demand would create 2.1 million jobs, which "would reduce unemployment by 1.5 percentage points.”

By the end of 2017, Zandi expects mortgage rates to rise from their current rate of about 4 percent back to their "equilibrium” of 6 percent, which he noted would be very consistent with a solid job market and solid housing market.

"The housing market will be fine because of better employment, higher wages and solid economic growth, which will trump the effect of higher mortgage rates,” he said.

He added that single-family starts could be closing in on 1 million units by the end of 2015 and multifamily production could go as high as 500,000 units.

Housing and Jobs Go Hand-in-Hand

Delving beneath the national numbers, Robert Denk, NAHB’s assistant vice president for forecasting and analysis, noted the housing recovery will vary by state and region.

"We are getting back to the point where economic conditions are dictating the strength of local housing markets,” said Denk. "It is very clear that those states with higher levels of payroll employment or labor market recovery are associated with healthier housing markets.”

Energy-producing states–North Dakota, Texas, Louisiana, Montana and Wyoming–where job growth is strong are also at the forefront of the housing recovery while Iowa and other farm belt states supported by agricultural commodities are also running above the nationwide average.

Meanwhile, states such as Nevada, Arizona, New Mexico, Alabama, Rhode Island and New Jersey that are coping with weak labor markets are also struggling to get their housing activity back on track.

Housing nationwide bottomed out at an average of 27 percent of normal production in early 2009 and the gradual and steady housing recovery now underway across the land will bring nationwide single-family housing starts to 68 percent of normal by the fourth quarter of 2015 and 90 percent of normal by the end of 2016.

In another way of looking at the long road back to normal, by the end of 2016 the top 40 percent of states will be back to normal production levels, compared to the bottom 20 percent, which will still be below 75 percent.

Housing Markets Inch Toward Full Recovery

Markets in 59 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the third quarter of 2014, according to the National Association of Home Builders/First American Leading Markets Index, released Nov. 6, 2014. This represents a year-over-year net gain of seven markets.

The index’s nationwide score moved up slightly from .89 in the second quarter to .90, meaning that based on current permit, price and employment data, the nationwide average is running at 90 percent of normal economic and housing activity. Meanwhile, 66 percent of markets have shown an improvement year-over-year.

"The markets are recovering at a slow, gradual pace,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. "Continued job creation, economic growth and increasing consumer confidence should help spur pent-up demand for housing.”

Baton Rouge, La., continues to top the list of major metros on the LMI, with a score of 1.39 – or 39 percent better than its last normal market level. Other major metros leading the list include Austin, Texas; Honolulu; Oklahoma City and Houston. Rounding out the top 10 are Los Angeles; San Jose, Calif.; Salt Lake City; New Orleans and Charleston, S.C.—all of whose LMI scores indicate that their market activity now equals or exceeds previous norms.

"An uptick in the number of single-family permits, which is currently only 44 percent of normal activity, is the key to a full-fledged housing recovery,” said NAHB Chief Economist David Crowe. "In the 17 metros where permits are at or above normal, the overall index shows that these markets have fully recovered.”

"Nearly half of all the markets on the Leading Markets Index are up since August, which is a good sign that the ongoing housing recovery will keep moving forward in 2015,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.

Looking at smaller metros, both Midland and Odessa, Texas, boast LMI scores of 2.0 or better, meaning their markets are now at double their strength prior to the recession. Also leading the list of smaller metros are Grand Forks and Bismarck, N.D., and Casper, Wyo., respectively.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity. More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth. For single-family permits and home prices, 2000–2003 is used as the last normal period, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics. An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.

Remodeling Market Index Reclaims All-Time High

The National Association of Home Builders’ Remodeling Market Index reclaimed the high-water mark of 57 in the third quarter of 2014. This is the sixth consecutive quarter for an RMI reading above 50.

An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

"Most remodelers remain confident that the market is improving as home owners undertake renovations, large and small,” said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, N.H. "The consistency and longevity of positive RMI readings are in line with the gradual recovery of the housing industry.”

The RMI’s future market conditions index rose to 58 from 56 in the previous quarter. All four of its subcomponents—calls for bids, amount of work committed for the next three months, backlog of jobs and appointments for proposals—increased or remained level with the previous quarter’s reading.

The current market conditions component of the RMI increased one point to 57 this quarter. A two-point gain was made among the categories of large additions as well as smaller remodeling jobs with readings of 56 and 58, respectively.

"The stabilization of the RMI in the mid-50s for more than a year demonstrates the slow, steady recovery of the housing industry that we expect to continue,” said NAHB Chief Economist David Crowe. "The major headwind to a stronger recovery is a shortage of qualified labor and subcontractors in some parts of the county, making it difficult for remodelers to employ carpenters and finish projects as quickly and economically as many of their customers expect.”

National Guild of Professional Paperhangers Rebranded as Wallcovering Installers Association

On the eve of its fifth decade of supporting exceptional installation craftsmanship within the wallcovering industry, the National Guild of Professional Paperhangers, Dayton, Ohio, has announced an ambitious rebranding. The Wallcovering Installers Association ( will continue in the tradition of the NGPP while also recognizing that the industry continues to change with the times.

As part of moving the association into the future and encouraging professional development, WIA will soon launch a series of online training modules at Graduates of each module earn the designation of "accredited installer,” a mark of distinction and a symbol of trustworthiness for consumers.

The mission of WIA has been consistent throughout its 40-year history; its steady expansion into an international group has necessitated the rebranding. The term "paperhanger” has declined in popularity, while "wallcovering installer” has become the preferred term for professionals in the industry. The WIA homepage now features the new name and logo, along with simple navigation to give visitors access to an array of tools and features. Professional wallcovering installers can apply for membership at

AWCI Colorado Awards

AWCI Colorado hosted its annual awards program on Oct. 22, 2014, to honor the following winners of AWCI Colorado’s 2014 Excellence in Construction Quality Awards:

• Lifetime Achievement Award: Jerry Screws

• Manufacturer of the Year: CEMCO

• Manufacturer Sales Rep. of the Year: Brandon Kaplan, STI, Inc.

• Supplier of the Year : Colorado Drywall Supply

• Supplier Sales Rep. of the Year: Michael Stoddard, Colorado Drywall Supply

• AWCIC Person of the Year: Ben Kelly, Drywall Partitions

• Residential Single Family: South Valley Drywall

• Suspended & Acoustical: Heartland Acoustics & Interiors

• Commercial less than $1,000,000: Drywall Partitions

• Commercial more than $1,000,000: Runner-up: E&K of Denver

• Commercial more than $1,000,000: Winner: South Valley Drywall

People in the News

Brad Baker of the corporate offices of BakerTriangle in Texas has formally announced that Debbie Brocker has been named to the position of chief operating officer and Michael Vickery to the position of chief marketing officer.

Brocker, a 35-year employee, has served in many different roles but facilitates results in every step she takes. Her current title is vice president but she is that person whom everyone goes to when they need something done. She reports directly to Baker but she serves everyone in need to make their job go as smooth as possible. She effectively oversees office operations for Corporate and provides oversight, management and assistance for office operations at each of the company’s office locations.

Vickery, senior vice president of sales and a 10- year employee, leads the company’s efforts in sales management, marketing communications between offices and advertising. He will be instrumental in product development and help BakerTriangle to continue meeting the needs of their customers. One of his goals is to increase BakerTriangle’s value-added services to enable the company to get involved in a project earlier.

Johns Manville, a Berkshire Hathaway company and global building products manufacturer, announced Oct. 30, 2014, that Mary Rhinehart has been named chairman of the company. Rhinehart was appointed JM president and chief executive officer in November 2012.

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, selected Rhinehart for this additional role due to her diligent leadership of JM. "With more than three decades of comprehensive experience at JM, Mary Rhinehart has proven not only her ability to succeed at every level, but also her commitment to the business and passion for JM’s employees and customers. Mary is the right choice for chairman of JM,” said Buffett.

Rhinehart has held a variety of roles during her 35-year career, including as general manager of several Johns Manville business units. Before being named CEO, she was chief financial officer, providing her breadth of experience in all financial operations of the company. From human resources to supply chain management, Rhinehart’s range of responsibilities has also encompassed global business management and strategic business development.

The ALL Family of Companies announced the growth of its Cleveland sales team by two members—Mark Seymour and Brian Meek. Although Seymour and Meek are new to the sales department, they’re no strangers to the company, both having many years of experience as crane operators at ALL.

Seymour joined ALL in 1995 as an oiler/apprentice. He’s spent the majority of the last two decades operating lattice boom crawler cranes for a variety of projects, including power plants, steel mills, bridges, and more. His expertise will serve Ohio customers in Erie, Huron, Richland, Holmes, Ashland, Wayne, Medina and Lorain counties, where he’ll represent the full product line for sales and rentals.

Meek, an accomplished operator, joined ALL in 2004. As his career progressed, Meek became a part of train-the-trainer programs at ALL and extended the knowledge he learned from manufacturers to his peers—both in the classroom and in field training exercises. In his new role, he will also represent the full product line for sales and rentals in his territory of Summit, Portage, Trumbull and Mahoning counties in Ohio.

Privately-owned Gordon Lumber Company, Fremont, Ohio, selected Erin Leonard to become the company’s new president effective Nov. 1, 2014. The Ohio-based company employs 132 people in nine locations and was founded in 1868.

Leonard, who started with Gordon Lumber in 2011 and most recently served as chief operating officer, was chosen to fill the role of president after an extensive nationwide search.

Leonard has more than 18 years’ experience in the building products industry with positions previously held at Carter Lumber, 84 Lumber Company, United Building Centers and Stock Building Supply.

Minneapolis-based Radius Track Corporation welcomes Alex Batch as the company’s Northeast/Mid-Atlantic account manager.

In his new role, "he will be instrumental in helping build the sales of our products and services, and gain additional market penetration in the Northeastern part of the United States. He will be responsible for calling on all players of a typical project, including architects, general contractors and framing contractors, as well as the distributors who support our industry. We are very excited about the contributions Alex will make to our success,” stated Radius Track President Bob Krebsbach.

Located in Baltimore, his territory includes Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont Virginia and West Virginia.

Companies in the News

Cemco, headquartered in Los Angeles, has completed the purchase of its Fort Worth, Texas, manufacturing facility for an undisclosed sum. The 180,000 square foot manufacturing building that sits on a 22-acre site, has served as Cemco’s base of operations in this area since late 2011.

Superior Walls of America, headquartered in New Holland, Pa., has expanded operations into Canada with the addition of two new licensees manufacturing precast concrete foundation systems for the Canadian marketplace.

Superior Walls Alberta, Ltd., located near Calgary, now offers Superior Walls® Xi™ products throughout the province of Alberta. Superior Walls by Magnis, Inc., out of Beausejour, provides Superior Walls® Xi Plus™ products throughout the Manitoba province.

Products in the News

FibaTape has been granted patent approval on their Extra Strength Tape. The FibaTape Extra Strength fiberglass mesh tape is a multidirectional tape for reinforcing joints that was designed to increase structural integrity and joint strength. The patent was granted based on the greige fabric that is combined with a laid scrim resulting in a unique multi-directional pattern. The patented design is also 60 percent stronger than standard mesh tape.

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