Trends in the Commercial Construction Industry

Mayor R. T. Rybak’s 2011 budget address on August 17, 2010 must have brought cheer to the Minnesota commercial construction industry. The mayor, speaking from Minneapolis City Hall, put a lot of stress on “growth.” He also rejected the popular belief that Minneapolis, locked in by other municipalities on all sides, is fully developed.He listed many areas capable of absorbing extensive growth.

Earlier in the year, John K. McIlwain, Senior Resident Fellow, Urban Land Institute, in a presentation to the trustees said, “The old ‘normal’ will not return. Over time, a new mode of metropolitan development will emerge, presenting opportunities and stiff challenges. Those who fail to understand these new trends will find themselves building what is no longer in demand.”

While one is showing the way forward and pointing towards potential growth for the Minnesota commercial construction industry, the other cautions with words to be well-marked by Minnesota building contractors. The future will clearly be won by those that have taken advantage of the recession to reinvent themselves to a “new normal.”

Consumer Behavior and Demographics

Trends indicate that the major drivers for new real estate development will be consumer behavior and demographics. At a time of scarce resources and increased competition, extensive planning with emphasis on aggressive workforce training are the areas that the Minnesota building contractors should focus on.

Transit-oriented development

With the proposal to appoint a new director of transit-oriented development, Mayor Rybak re-emphasized the emerging trend of developing real estate along current and future transit lines. Though past experience has shown that employers, and therefore commercial buildings, do not necessarily follow this trend, there is a need to market transit-oriented job locations to private companies. The Minnesota commercial construction industry could use innovative ideas to develop the large expanses of undeveloped commercial property lying adjacent to light rail stations.

Nanomaterials

Nanotechnology materials and applications can be used by the construction industry to enhance material properties and functions. Considering that 41 percent of all energy used in the United States is consumed by commercial structures and residential homes, nanotechnology can help enormously in energy conservation.

Some Benefits from Manufactured Nanomaterials (MNMs) And Nanocomposites:

Structural strength enhancement
Self-cleaning surfaces
Corrosion resistance
Abrasion resistance
Biocidal activity in coatings and paints
Improved thermal management
Antimicrobial properties
Harvesting solar and other forms of renewable energy
MNMs can substitute for harmful environment pollutants such as lead and mercury

However, research is still underway on the potential pollutant risks from MNMs. The industry is still gaining insight into the life cycles of these new materials and weighing the risk factors workers are exposed to. The Occupational Safety & Health Administration hosted a Web Forum (August 16, 2010) to identify hazardous chemicals most in need of agency action. Still, one thing is clear — progressive companies who stay current with new, safe technologies will come out ahead.

3 Common Accidents In the Commercial Construction Industry

If you are either looking for work in the commercial construction industry or are new on the job; you might be wondering what kind of dangers you face. Actually it makes more sense to ask this question before you begin your search. But whether you did this or not, the answer to your question is that there are some accident risks you should be aware of. This is true of any labor-oriented job; not only construction jobs. The list of possible accidents you could be involved in is rather long. For the purposes of this article we will focus on three of the most common ones. If you would like additional information do a search on the Internet. It is also a good idea to have a lot of applicable insurance available to you incase an accident does happen.

The first of these accidents we will talk about is construction site falls. It is an unfortunate statistic that more than 300 deaths per year on construction sites are attributed to falls. It is even more unfortunate that these deaths and other serious injuries can be prevented and really ought to be. These incidents are called accidents for a reason and never happen on purpose. However; if safety standards are strictly being adhered to, most of them never would occur. This is true of any of the accident types we are discussing here; but perhaps more so when it is related to a fall.

Another type of common construction site accident is when the crane falls. Although operating any of the heavy machinery on these sites is hazardous, the crane is perhaps more hazardous. This is because the crane part itself is very heavy and stretches way high into the air, often while in motion. The crane does have a multiple number of brace-like parts on it that are designed to secure it to the ground. But accidents do happen when now and then the crane becomes too unbalanced to reverse and the whole thing comes toppling to the ground. When this event occurs; typically somebody is injured, and at times the injuries are fatal.

A separate type of construction site accident relates to our earlier discussion of workers falling. That is holes in the flooring and is a more common occurrence than you would think. This is another incident that is very preventable by clearly marking the site of the hole for all workers to see. When people get careless or sloppy because they are in a hurry to get the job finished is when this kind of accident is the most prevalent. Again; nobody deliberately sets out to hurt somebody. They either are rushed or maybe just plain tired from working so hard and they get careless. In this way the culprit is actually a victim too because they have to live with this for the rest of their lives.

No matter what type of injury has affected you or a family member you ought to speak with a reputable attorney about any legal action you can take. Plus; like we stated earlier, if you are going to work at this kind of job you really must have excellent insurance coverage. Be safe, not sorry – get the insurance.

How the Recession Has Affected the Commercial Construction Industry

For some time, I have asked myself (and others), “What was so great about The Great Recession?” This economic crisis has been deemed by the International Monetary Fund (IMF) as the worst world-wide recession since World War II. Its impact has been felt in nearly every industry imaginable, and particularly in the construction industry. It ran its course for 18 interminably long months, between 2007 and 2009; the worst period occurred at mid-year, 2009.

How did it affect the commercial construction industry and what has/will be happening nearly 5 years after the official “end” of the Great Recession?

What happened?

The construction industry is accustomed to cyclical changes but the Great Recession was hardly a typical downturn or cyclical change. No sector of the construction industry was spared from the harsh impact of the Great Recession; not residential, commercial, industrial, or heavy and civil engineering.

One aspect of the recession that is not often mentioned is that the cyclical boom of the construction industry was followed directly by the recession, leaving a large glut of residential and commercial real estate on the market.

As the recession deepened, homeowners were defaulting on their homes, others were not buying homes as they had planned, and investors were being extremely cautious in financing new construction projects.

2012 – 2013 was predicted to be a period of growth and non-residential construction activity was expected to continue its recovery. Once, again, there were recovery delays, fueled in part by government and financial institutions:

A federal budget sequester resulting in scaled back government spending.

A federal government shutdown.

Credit restrictions placed on construction projects, home loans, loans in general.

Increasing long-term interest rates based on expectation of the government reducing its stimulus program.

Those factors, and the extremely slow recovery of the world economy, certainly had a direct and negative influence on the construction industry.

Moving into 2015

So what is the state of commercial construction in 2014 and beyond? Recovery is happening, but not at an increased pace. Factors that (according to industry observers) influenced growth in 2014:

Weather-related delays on projects at the start of the year.

Ongoing sluggishness in the institutional market and lowered construction spending projections.

Financial institutions continued their restrictive lending practices.

Is there any good news? Yes! Let’s look at some of the more favorable changes in 2014 and some positive indicators going into 2015:

Some easing of lending restrictions; loans rose 4 percent in the second quarter of 2014, most of it related to the commercial real estate industry.

Commercial construction projects are rapidly increasing in several regions of the U.S., particularly in Texas (Houston) and the southern region in general, and New York (Rochester and New York City), Massachusetts (Boston), and Louisiana (New Orleans).

Consumers are “cautiously optimistic” and spending is up, as is the increase in jobs.

The commercial construction industry was, and continues to be deeply affected by the Great Recession. But industry watchers, like consumers, are cautiously optimistic (with more emphasis on cautious than optimistic) that the industry is slowly and steadily moving forward.

How the Recession Is Affecting the Commercial Construction Industry

The ‘Great Recession’ theoretically lasted about 18 months, from 2007 to 2009. Recovery has been agonizingly slow in many industries but we are now in 2015 and the construction industry is more rapidly shrugging off the residual effects of the recession.

How Bad Was It?

Even though construction industry is cyclical and recession typically follows a boom period, nothing could have prepared it for the harsh and widespread reach of the recession:

Residential: Homeowners defaulted on homes and others delayed buying homes, leading to a glut of residential real estate languishing in realtors’ inventory.

Commercial: Commercial construction also was hard hit, severely impacted by the federal budget sequester and eventual-but-temporary shutdown, followed by scaled back government spending, and sharply reduced lending practices.

Institutional: Institutional construction remained stagnant, affected by the same limitations and funding problems that the commercial construction sector faced.

How Were Construction Workers Affected?

Nevada, California, Florida, and Arizona are typically areas with plenty of construction work. But the recession changed that:

Nevada employed an estimated 146,000 construction workers at the peak of its construction boom. That number was reduced by 59 percent.

Arizona’s construction employment dropped 50 percent from its pre-recession industry peak.

Florida was close on the industry-related unemployment heels of Nevada and Arizona, losing 40 percent of its construction workforce.

California fared better but still recorded a 28 percent drop.

According to the U.S. Bureau of Labor Statistics (BLS), approximately 2.3 million construction workers lost their jobs in the recession (nearly 30 percent of the total number of lost jobs).

The overall construction industry has an estimated 1.4 million fewer construction workers in 2015 than it did in 2007.

The Construction Outlook in 2015 and Beyond

Happily, the U.S. and its construction industry continue to move away from the harshest effects of the Great Recession. Industry observers expect to see these improvements:

Non-residential construction: picking up and looking more solid, especially with the expected 2.6 percent real GDP growth in 2015. This sector may rise by 8 percent with growth in office buildings, hotels, and industrial facilities.

Single family housing: expected to increase by 11 percent in the number of residential units, thanks to easier access to home mortgage loans.

Manufacturing plant construction: will probably drop about 16 percent after huge increases of 2013 and 2014.

Institutional construction: expected to continue its moderate upward trend and increase 9% over 2014 results.

Residential construction: called the potential ‘wild card’ of 2015 because of rising interest rates. Existing home sales may climb toward 10 percent.

Public construction: growth will remain low due to ongoing federal spending constraints. However, transportation spending is expected to grow by about 2.2 percent.

Ironically, construction workers may not be rushing to return to new jobs. Many left the industry altogether, retraining for other employment.

Texas and North Dakota both show significant increases in construction employment. North Dakota now needs to recruit construction workers. Texas’ construction employment is up 10 percent, nearing its pre-recession peak.