US Construction Industry Report

The construction industry in the US is recovering, but still, cannot be compared with the performance of 10 years ago. Partly because of the political climate that produces uncertainty, strong factor generating that growth is not as expected. However, exists is a trend regard to the growth of foreign investment in the construction industry in the US as well as investment in technology that will contribute to construction industry growth. The information collected in this report covers data from 2002 to April 2016.

Growth in the Construction Industry

The construction industry was one of the sectors most affected by the recession. In March 2006, the highest peak in the industry reached $ 1.2 Trillion valuation*. The total monthly value of private construction was driven largely by the housing sector (half of all private construction in 2006), which fell from $ 961 billion in March 2006 to $ 466 million dollars in January 2011, more than 50 percent.In July 2009 the monthly valuation of public construction projects peaked at $ 322 billion through the creation of public funds such as The American Recovery and Reinvestment Act to stop the collapse of the sector. But by July 2015 this valuation has been reduced to $ 295 billion, being by April 2016 of $ 220 billion. However from 2011 it is a gradual growth and this is due largely to the recovery in private sector construction, the spending in April 2011 was $ 616 billion growing to $ 916 in the same month in 2016.

Based on the US Census Bureau

In February 2006, construction of single-family homes reached a peak of $ 470 billion. With the crisis, in May 2009 the monthly expenditure reached its lowest level at $ 91 billion. Finally, in July 2014 a recovery reaching $ 187 billion for the monthly expenditure was evident. This shows a recovery in the type of single-family houses but still remains 40% below the levels reached before the crisis.On the other hand, the residential market improvements and renovations remained stable. In February 2006, the monthly expenditure accounted for $ 150 billion, an amount stood at $ 100 billion during the recession. Its highest peak was manifested in 2013 with $ 144 million declines in 2014 to get $ 127 billion. This factor could be that the idea of increasing the value of homes, lost by the crisis, people thought to invest in house renovations. Today this growth is due to the recovery of the American economy, rising employment, and declining loan rates that have increased investment make in residential repairs. The residential sector represents a slight growth in the construction industry, may be because of people with stable employment, wages are also increasing. At the same time, prefabrication is a trend in residential construction, because they offer flexibility for the construction project at the same time this reduces construction costs. Regarding of the Non-residential market, for 2016 is forecast a growth of 9.9% for the commercial market, several economic analyzes indicate that the hotel sector represents the highest percentage for this industry representing growth of 14.8%, and for offices 12,8%, the second most important sector. At the same time is forecast a growth in the health sector and education with 6.6% and 6.5% respectively.

Based on data of the American Institute of Architects*Valuation: The data used in this report were based on information generated by the US Census Bureau, which provides estimations of the total value (materials costs, labor costs, etc.) of construction work in the US, providing monthly estimates.

Analysis of the regional market

In 2016 due to low labor costs and low costs on land south of US. Several companies have taken this opportunity to move to this area to cities like Charleston, Atlanta, and Charlotte. Also, cities like Nashville have experienced rapid growth by having skilled and low-cost labor. On the other hand, San Francisco and Silicon Valley are the main markets in technology, representing one of the highest costs in the construction sector throughout the US, ranking near to New York in terms of construction costs.For the office construction demand in 2016, there will be a growth in the markets of Chicago and Austin. Likewise, Nashville will become one of the top ten in this market for office construction while Houston descends with 12.1 % to fourth place after being the most important in 2015, by declines in energy prices. Finally, Tampa Bay beats Los Angeles in the top 10 in the industrial construction sector. Also, in recent years it is a trend in the southeast of the country where markets offices, industrial and retail dominate.

Employment in the Construction Industry

According to the US Bureau of Labor Statistics about 2.3 million employees in the construction industry lost their jobs with the recession. That is approximately 30% of total jobs lost. But the scenery is different today, as employment begins to show recovery rates. By 2015 the number of employees in this industry was 9.9 million, although it is still 2 million below the peak of 2007 with 11.8 million employees in the construction industry.The five states with the lowest unemployment rate in the construction industry for March 2016 are Colorado with 3.9%, Nebraska with 4.6%, Hawaii with 4.9%, Georgia 5.1% and Virginia with 5.7%, while states with higher rates are Alaska with 19%, West Virginia with 15.5%, with 14.3% Illinois, New Mexico with 14.2% and 14.1% with North Dakota.

On the other hand, Hispanic employees are those that represent a higher level of participation, from 2012 to 2015. Employment in the construction industry has increased by 1 million workers, of which approximately 70% of these new jobs were filled by Hispanic employees, who represent 29% of total jobs in this industry - based on the Bureau of Labor Statistics -. But Hispanics not only represent a high percentage of workers, but also as owners of companies, where only 5% of construction companies were Hispanic in 1999, and in 2012 this percentage was as high as 16%.

Another trend in this industry is that due to the lack of skilled workers, the labor costs have increased. After the crisis and because of mass unemployment, many workers in the construction sector industry changed to other sectors and now they refuse to return, while the new generation refuses to make a career in the construction industry.To sum up, in 2015 the increase in employment is still lower than in 2007, but the economy shows a recovery from 2010. A trend is increasing towards hiring Hispanic employees and an increase in wages due to lack of qualified personnel. Therefore the search for qualified personnel is the biggest challenge for the industry.

The biggest sector

In the Heavy / Civil Contractors sector, the domestic industry is threatened by the entry of foreign companies wishing to invest in the sector. In order to address this, the domestic companies are more selective with construction projects. And there is a special interest in seeking investment in mega projects, projects of more than $ 500 million.On the other hand, the sector hit hardest by the crisis is the Engineering and Architecture. Several of his employees resigned and moved to other areas where they could obtain greater economic benefits, now they do not want to return to their profession which creates a struggle of talent, which is why this sector has been affected by the downsizing. For this reason, many companies have changed the way they operate thus prefer to have technology even with few costs.At the same time, there is more government investment to highways and other sectors instead of Engineering and Architecture, so this type of industry seeks more for private investment rather than public investment. On the other hand, Engineering and Architecture industry is a sector with a growth trend compared to other sectors and this is due to the international technology companies’ investment.Last but not least, the Heavy/Industrial Contractors market is growing but for different socioeconomic factors not performed as fast as expected -like the recent crisis of oil and gas-. Not surprisingly, those industries that should benefit from rising oil prices, have a flat growth and those that benefit from lower oil prices have increased. The low prices of oil and gas and leadership that the US has with respect to the oil market, have generated growth in the energy industry, therefore construction projects for this industry are currently highly sought.

Summary of the Construction Industry

It is true that the 2008 crisis hit the construction on the US and worldwide strongly, but it is also true that every crisis can take a big step towards evolution. The recession was a factor that contributed to the search for new technologies to reduce costs. A strong trend for 2016 market, where increasingly information systems were used or the rise of Construction Delivery Methods - systems to organize, finance, design, operations, maintenance, etc.-In short, 2016 is a year marked by technology. However, there are many challenges to face. First by the shortage of labor at all levels, therefore companies have to do strategies in order to recruit and retain qualified personnel.Finally, despite the slow growth of the US economy, the dollar remains strong relative to other currencies. This is because the growth in the Eurozone is unequal, in China's rapid growth is starting to become slowly and in Latin America by cases of political uncertainty, international investment diminish. This is a factor that contributes to international investment in the US, -because its economy is currently characterized to be more stable with strong consumer markets and low energy costs - therefore also influences the construction sector.

Author: Angela Venegas