This week’s METALCONLive! featured industry economists who presented recent findings from this past year to identify the trends and help members of the metal construction industry navigate through the rest of the year and beyond. PSMJ Senior Principal David Burstein and Ken Simonson, chief economist with The Associated General Contractors of America (AGC), both presented comprehensive and encouraging data all pointing in the direction of a robust year in metal construction, while still highlighting some challenges that lie ahead.
Ken Simonson, Chief Economist, The Associated General Contractors of America
Ken kicked things off by commenting, “The beginning of 2021 is painting a completely different picture than one year ago today.” Construction employment is at an all time high since 2006 in residential construction; up in 14 states and in DC with the highest increases in Idaho, Utah and South Dakota. Year-to-date construction spend between January and March this year versus last year shows the highest gains in private residential with 25% in single-family homes. Non-residential areas with increases were in primary/secondary education, warehouse, and the mass transit segment of transportation. The biggest losses remain in retail, manufacturing and lodging. Ken added, “Manufacturing is gradually getting better with recent announcements about a couple of electronic companies about to launch significant projects.”
Construction input and bid price producer price indexes (PPIs) saw a huge increase compared to one year ago, especially for new residential construction. But concerns lie in significant price increases for construction materials including fuel, lumber, and steel.
How long will it last? Ken estimates the cost squeeze may last two years or more based on history, but despite the increase in costs, medium and long-term opportunities will help construction to continue to see gains.
AGC’s response to helping the construction industry navigate through these changes includes producing a Construction Inflation Alert, Webinars, The Data DIGest weekly 1-page email, government relations, and lobbying for tariff relief direction with White House officials. Check out these resources at www.agc.org or contact Ken directly at firstname.lastname@example.org.
David Burstein, PSMJ Senior Principal
PSMJ’s focus has been more on the architect, engineering and design industry and has been conducting quarterly market surveys of A&E firms since 2003. From these surveys, PSMJ hopes to provide the metal construction industry with data and tools to understand what the market will look like post-pandemic. Dave opened by conducting an informal poll of webinar participants asking “How did A/E Proposal Opportunities look in Q1?” 42% responded about the same as last year and 34% reported a bit better than last year. This is consistent with their PSMJ Q1 Quarter Market Survey – out of the last ten years, the gain in Q1 2021 was the highest in the history of the survey.
Dave reported they typically see increases in one region over another, but they are seeing the numbers to be fairly consistent across regions right now. They are seeing some gradual recovery in commercial markets, but similar to Ken’s presentation, the real increases are in the residential market. They are also seeing increases in proposals for K-12 schools, light industrial, and health care. Housing is the real story though, up 77% in Q1.
Regarding the future outlook, both Ken and Dave share similar views.
Medium-term, Ken says, “Economic recovery looks more certain but virus risks remain, best private prospects include remodeling, local distribution centers, data centers and restaurants, there is less demand than pre-crisis for retail, offices, higher ed, lodging and other travel-related but less near-term demand for sports and entertainment facilities, K-12 education will remain strong and it’s unclear how states and localities will spend federal dollars along with the uncertainty of infrastructure projects.”
Similarly, Dave suggests those in the industry should, “Pursue warehouse and distribution facilities, light industrial facilities, K-12 schools and possibly community colleges, most types of government buildings, all health care markets and all housing markets and to steer away from most commercial markets, higher education and sports facilities in the near distant future.”
IF YOU MISSED IT LIVE, CATCH THE EPISODE ON DEMAND. At the end, be sure to submit the questionnaire to obtain your free AIA/LSU credit.
For the latest in metal construction, join us IN PERSON at METALCON 2021, scheduled for October 6-8, in Tampa, FL. REGISTER TODAY or if you have a product to showcase, consider exhibiting at this year’s show.