2012 Construction Industry Review

Anderson: Privately funded construction and the industrial sector have seen the most growth in 2012. The industrial sector has been particularly strong in oil and gas markets, as well as power, hospital and higher education sectors.

Lescohier: The best-performing construction segment has been power and energy. Warehousing, rail and trucking facilities and healthcare construction have also grown. For private residential construction, strength has come from multi-family construction, which is expected to see ongoing double-digit increases. As a whole, construction spending is expected to be up anywhere from 5% to 15% for the year.

Despite reports of growth in some areas, recovery in construction markets has not been as robust as anyone would like. From my perspective within the equipment rental market, the silver lining to the sluggish construction market is the effects it’s had on equipment rental. As contractors remain skittish about their economic prospects, and with credit still tight, many are turning to rental more and more for their equipment acquisition needs. While this could be a reactionary trend, I believe there has, in fact, been a permanent shift toward rental. Currently, approximately 50% of all equipment on North American job sites is rented. This is a significant increase over just a few years ago, when only 35% of equipment in use was rented. At the end of the day, contractors have gotten smarter about equipment management and this is benefitting equipment rental businesses. I expect there to be significant growth in rental through 2016 and beyond.

Anderson: Almost every sub-sector of the public sector has seen a decline. Contractors say key publicly funded segments such as highway and transportation markets have been hit the hardest.

Lescohier: The value of bridge work is expected to drop by 10% from $26.3 billion to $23.6 billion in 2012, while the value of work on airport runways is expected to fall 4% from $4.9 billion in 2011 to $4.7 billion. After a decade of growth, subway and light rail construction is expected to drop nearly 16% from $5.4 billion to $4.6 billion as transit agencies pull back on projects.

Anderson: According to IHS Global Insight, privately funded construction saw a 14.4% increase year-on-year from August 2011-August 2012. This was fueled by the residential sector, along with lodging, office, educational and power-related construction work. Although there were slight gains in the power, transportation and amusement and recreation sub-categories, private non-residential work was -3.6% lower in September than a year previously.

Lescohier: Residential construction is projected to increase 8% to $264.4 billion in 2012. Nonresidential buildings are projected to increase 4% to $341 billion, with slightly higher growth in 2013 to $361 billion. That said, fierce bidding competition among "hungry contractors" will continue to keep profit margins low.

Anderson: Public residential construction is down -26.1% compared to a year ago.

Lescohier: After several years and several extensions, MAP-21 (Moving Ahead for Progress in the 21st Century Act)  was signed into law by President Obama on July 6, 2012. Funding surface transportation programs at over $105 billion for fiscal years 2013 and 2014, MAP-21 is the first long-term highway authorization enacted since 2005.