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ColumnsNatalie Forster: Editorial Opinion

2013’s construction warm spots

Upswings include health care, multifamily, casinos and prisons

By Bob Miodonski
Bob Miodonski Editorial Opinion
January 15, 2013
When industry consultant FMI released its 2013 U.S. Markets Construction Overview just before last November’s election, it was with the idea that Republicans could control both houses of Congress. That Mitt Romney and not Barack Obama would be taking the presidential oath of office this month also appeared to be a real possibility at the time.

Yet even though its report suggested that Obamacare could be dismantled this year by a new Congress and administration, FMI was forecasting double-digit growth in health-care construction spending through 2015. Since health care probably would have felt the most impact from change in Washington, it’s a good place to start to look at what FMI predicts in construction sectors this year.

• Health care. FMI expects this sector to grow 7% in 2013 after an expected 3% increase in 2012. Spending will reach record highs of $52.6 billion in 2015. FMI sees the growth in health care driven by the needs of aging baby boomers and renovations of existing facilities. In fact, 73% of construction dollars are being spent to make these facilities greener and more patient friendly and to update their IT infrastructure.

Other trends to watch in health care are more use of prefabrication, building information modeling and integrated project delivery.

• Multifamily housing. This sector, with its 32% growth, will continue to lead residential construction in 2013. Even though multifamily represents less than 20% of the total residential market, FMI expects that to keep growing. It was just 13% of the market in 2006. FMI expects single-family construction to show solid growth this year, although still in single digits.

• Manufacturing. This sector, which saw 3% growth in 2012, will experience steady increases through 2016. The automotive industry is leading the way along with utilities, especially those for natural gas. Manufacturing capacity now tops 79%, which is near normal; continued uneven growth will keep companies from adding capacity and employees.

• Education. FMI forecasts 2% growth in 2013 following a 1% increase in educational construction in 2012. State tax revenues are rising again, but money is still tight.

Green construction, particularly renovations of existing schools for energy and water conservation, will remain a strong trend in 2013. Many universities say they will build only LEED-certified facilities. Modular school construction — not to be confused with temporary classrooms in trailers — will be another trend to watch.

• Office buildings. This sector should grow 6% in 2013 through 2014 after an expected 4% increase in 2012. Boston, Chicago, New York and other big cities will see more activity.

Holding back new office construction will be status-quo vacancy rates, unsteady employment increases and the growing popularity of home offices. Spurring activity will be renovations to make offices greener and tenants who trade up to better appointed offices.

• Retail.Commercial/retail construction is expected to rise 8% in 2013 to $49 billion. This will follow 5% growth last year.

The higher activity is occurring despite several big-box retail chains closing money-losing stores and the rise of online shopping. Lower energy prices, however, should help to raise discretionary spending by consumers.

• Lodging. FMI forecasts construction to grow 7% in 2013 and 8% in 2014 after rising 4% last year. The weak U.S. dollar will help to attract international travelers while lower gasoline prices may boost domestic vacation plans. Hotel owners are renovating more than they are building new properties. 

• Public safety. Construction of another form of lodging — namely prisons — will increase 6% in 2013. Perhaps the most startling fact in FMI’s report is that one in every 100 adults in the United States is incarcerated. The resulting overcrowded prisons and jails will mean new and renovated facilities.

• Religious. Construction of religious buildings will witness a revival in 2013 of 6% growth to $4.3 billion after a flat 2012. Mormon temples and Islamic mosques have been the most active new building projects in recent years. A growing trend is the conversion of vacant stores in shopping malls or individual storefronts to churches. Holding this market back are many congregations’ difficulty in getting building loans and a steep drop in tithes.

• Recreation.Football stadiums for the NFL’s San Francisco 49ers and the Minnesota Vikings will contribute to the 8% growth to $17.4 billion in this sector in 2013. New casinos in New York, Pennsylvania, Florida, Maryland and Ohio will help contractors in those markets but temper growth in Las Vegas and Atlantic City, N.J.  

While only a couple of these sectors would qualify as "hot spots," they're all definitely warm, and moving in the right direction. 

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KEYWORDS: construction industry housing market

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Miodonski

Bob Miodonski is the former Group Publisher of BNP Media’s Plumbing Group, which consists of industry-leading print and digital magazines, websites and e-newsletters. Titles include: Supply HouseTimes, Plumbing & Mechanical, PM Engineer and Reeves Journal magazines; Bath & Kitchen Pro e-News; PVF e-News; Radiant &Hydronics e-news; and www.RadiantAndHydronics.com.

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