Anticipated increases in demand for private construction projects, as well as growth in both hospital and higher-education construction projects have a number of general contractors optimistic about what’s to come in 2013. Respondents weighed in on a recent survey conducted by the Associated General Contractors of America (AGC) who reported they were positive about the outlook for this year. The survey was conducted as part of the association’s “Tentative Signs of a Recovery: The 2013 Construction Industry Hiring and Business Outlook.”
“Construction was actually stable in 2012,” says Stephen Sandherr, AGC CEO. “Construction investments rose by about 7 percent last year, driven mostly by increases in private sector demand. Construction employment only increased by 18,000 nationwide.”
He continues, “The question we want to answer from this year’s outlook is whether the industry expects demand for new construction activity to rise again and, if so, will that new activity finally translate to significant increases in construction employment, demand for new equipment and a renewed sense of optimism among contractors?”
On a positive note, he said that 20 percent of the firms surveyed plan to add employees to their staffs in 2013, while 9 percent expect to make layoffs. Seventy-nine percent plan to add 15 or fewer people, while 13 percent plan to add 25 or more workers.
“Firms are more optimistic about the outlook for hospital and higher education facilities, with 38 percent expecting demand for these types of structures to grow, while 39 percent expect this area to remain stable,” says Sandherr.
However, the news is not all good.
“Unfortunately there are as many causes for concern as there are signs of optimism,” says Ken Simonson, AGC’s chief economist. “The demand for public buildings is sure to decline again, manufacturing work has been slacking again … material costs continue to rise and many firms are reluctant to make investments in new equipment.”
He continued, “Many firms expect the demand for public construction to decline in 2013; specifically, 40 percent of respondents expect demand for public buildings to shrink while only 18 percent expect that market to grow. Another 37 percent report that they expect demand in K-12 school construction to shrink while only 20 percent expect it to increase.”
However, the numbers of projects that have been cancelled or delayed due to tight credit conditions was down 9 percent for 2012, according to the survey.
“Forty percent of contractors reported having projects cancelled or delayed because of tight credit conditions during the past 12 months, while a year ago 49 percent reported delays or cancellations,” said Simonson.
Another factor that will play into the 2013 market is rising costs for both health care and materials.
“Seventy-seven percent of firms expect to pay more for health coverage this year while 90 percent of firms expect to pay more for materials this year,” said Simonson.
Overall, Simonson reported that only 20 percent of the companies surveyed said they expect the overall construction market to grow in 2013, while 46 percent don’t expect it to grow until 2015 or 2016.
“In other words, 2013 should be a better year, but not a great year, for most construction firms,” he said.