Construction Market Off to Sluggish Start in 2012 But Big Projects Starting to Pop

Feb. 24, 2012
Although folks in the electrical construction business seem more optimistic than they have been in years, the market is still struggling to gain momentum in 2012’s first quarter.


Although folks in the electrical construction business seem more optimistic than they have been in years, the market is still struggling to gain momentum in 2012’s first quarter.

In his monthly press statement on business conditions in the construction market, Robert Murray, vice president of economic affairs for McGraw-Hill Construction, said, “Construction starts got off to a slow start in 2012, with activity retreating further into the lower half of its recent range. This is consistent with the view that construction is still struggling to achieve upward momentum, even with the recent improvement shown by the U.S. economy.

“There were some positive signs for construction during 2011, such as a stronger volume for multi-family housing, a record high for new electric utility starts, and even gains for a few commercial structure types (hotels and warehouses). However, these positives were offset by declines for single-family housing, public works and institutional building. For 2012, both public works and institutional building will continue to be affected by diminished federal funding, as well as by tight state and local budgets.”

Murray added that multi-family housing appears to be on the upswing and that commercial building seems to be turning the corner, but that both will require bank financing to be more available. “There were some signs that this was taking place during the first half of 2011, before concerns about the debt crisis in Europe during the second half of 2011 caused banks to adopt a more wait-and see approach,” he said.

Construction employment data also seems to point toward a sluggish start for the industry in 2012. The U.S. Department of Labor said that in December electrical contractors employed 722,000 workers, roughly the same as Nov. 2011 and a year earlier, but still approximately 23% below the recent peak of 943,000 workers in Oct. 2007.

Overall construction employment remains below peak levels in 329 out of 337 metro areas, according to data recently released by the Associated General Contractors of America, Arlington, Va. Given the continued weakness in construction employment, the association urged Congress to pass infrastructure measures, including legislation to fund highway, transit and aviation construction work. Stephen Sandherr, the association’s chief executive officer, said in a press statement that he believes many of the job losses could have been avoided “if Congress wasn’t years late in passing measures like the highway and transit bill.”

Sandherr said in the press release that the Phoenix-Mesa-Glendale, Ariz. area lost more construction jobs since its peak employment (down 93,600 jobs compared to Dec. 2006, a 53% drop) than any other metro area. Other areas experiencing large declines in construction employment compared to peak levels included Riverside-San Bernardino-Ontario, Calif. (down 73,700 jobs compared to December 2005, a 57% drop); Las Vegas-Paradise, Nev. (down 65,900 jobs compared to December 2005, a 62% drop) and Chicago-Joliet-Naperville, Ill. (down 64,800 jobs, a 35% drop). Lake Havasu City-Kingman, Ariz. lost the highest percentage of jobs (70%, a decline of 5,300 jobs compared to Dec. 2005).

In contrast, only six areas have more people working in construction than ever before: Bismarck, N.D. (up 400 jobs compared to Dec. 2010, an 11 percent increase); Lawton, Okla. (up 100 jobs since Dec. 2010, a 5% increase); Longview, Texas (up 600 jobs compared to Dec. 2010, a 4% increase); Houma-Bayou Cane-Thibodaux, La. (up 100 jobs compared to Dec. 2010, a 2% increase); Waco, Texas (up 100 jobs compared to Dec. 2008, a 2% percent increase); and El Paso, Texas (up 100 jobs compared to Dec. 2009, a 1% increase).

Two construction market segments that appear to be entering 2012 with some real momentum include the construction of manufacturing facilities that produce computer/electronic/electrical equipment and the electric utilities. According to Dec. 2011 data on the value of private construction data (at a seasonally adjusted annual rate) from the U.S. Department of Commerce, at $13.24 billion, construction of factories producing computer/electronic/electrical equipment was up 52.4% over Nov. 2011 and up an astounding 228.7% percent over Dec. 2010. At approximately $73.15 billion, construction by electric utilities in Dec. 2011 was up 19.9% over Dec. 2010 and up 3.6% over Nov. 2010.

Quanta Services Inc., Houston, was the beneficiary of some of this utility work, as it recently won a $300 million contract from American Electric Power (AEP) to rebuild or replace more than 900 miles of existing transmission lines and related infrastructure and signed a contract with Southern California Edison for a new 153-mile, 500-kV electric transmission line in an existing corridor.

Other big construction jobs either already started or scheduled to break ground in 2012 include the 61-mile SunRail, a $1.3 billion commuter line in central Florida that will run from DeLand, Fla., to Poinciana, Fla.; a $1 billion stadium for the NFL’s San Francisco’s 49ers that’s set to break ground this July in Santa Clara, Calif.; the $320 million town center project Rock Spring Centre in Bethesda, Md., expected to begin construction in a few months; the recently started $272 million court house in San Bernardino, Calif., a $220 million detention center underway in Detroit; and a new Apple data center in Prineville, Ore., that will begin construction later this year. Prineville is already home to a Facebook data center.

A humongous airport job broke ground last month at Houston’s George Bush Intercontinental Airport, which is undergoing a $1 billion expansion. An article in Houston’s Tribune newspaper said the $160 million first phase will include a new 225,000-square-foot terminal for Continental Airlines.