FMI Releases Q2-2013 Construction Outlook Report

 FMI, a provider of management consulting and investment banking to the engineering and construction industry, released Q2 2013 Construction Outlook. The strength of individual markets is shifting, reducing annual Construction-Put-In-Place predictions to $913 billion, a 7% growth from 2012. 

This is down nearly $6 billion from the $918,897 million, 8% growth estimated in the Q1’s Outlook. However, FMI does expect growth to return to 8% growth in 2014, with annual CPIP reaching $989 billion.
 

The major markets adjusted downward with lower expected growth are:

Residential Construction (-1.8%) — FMI continues to forecast a 23% increase in construction put in place for single-family housing. However, multifamily housing has dropped from a strong increase of 42% in 2012 to a current 31% increase for 2013.

Commercial Construction (-0.8%) — The current forecast calls for about a 1% drop in commercial construction from the Q1 forecast. However, this still represents a modest increase of 6%, to $49.8 billion for 2013. One of the contributing factors is that sales for retail and food service businesses is slower than initially anticipated.

Healthcare (-3.15%) — Contributing factors for the decrease include hospital beds per 1,000 people trending downward and shorter patient stays.

Amusement and Recreation (-2.0%) — Given the belt-tightening attitude across the country right now, it will likely be much more difficult to get funding from taxes and municipalities to build new stadiums in the near future.

Sewage and Water Disposal (-3.8%) — Construction for sewage and waste disposal was off 2% in 2012. FMI forecasts another 2% drop in 2013. The ability to fund necessary water infrastructure improvements is central to the decline as many municipal water systems still depend on the tax base for funding.

Water Supply (-3.2%) — Construction for water supply projects will drop 1% in 2013 after dropping 7% in 2012. On the bright side, in March the Senate Environmental and Public Works Committee unanimously approved a Water Resources Development Act, including a measure to create the Water Infrastructure Finance and Innovation Act. WIFIA would provide $50 million per year from 2014 to 2018 to help fund large-scale water infrastructure projects.

While there is no singular reason for the drop in these markets — each is evaluated on its own criteria — there are a few economic concerns that touch all of them.

• The decline in public construction
• Expectations of more cuts as the sequestration continues
• Tight lending criteria
• Consumers cautious about increasing their debt load.

This economic climate will keep the heat on A/E/C industry competition, especially if companies that make their livelihood in government construction start looking for work in the already competitive private sectors.

The report details CPIP in three residential building, 11 nonresidential building and five non-building structure categories. To download a copy of the full report, click here. For reprint permission or to schedule an interview with the author, please contact Sarah Avallone at 919.785.9221 or savallone@fminet.com.

Cansto Coatings Names Soeder as President

Cansto Coatings, a Mayfield Heights, Ohio-based chemical manufacturing company, has named Chuck Soeder as its new president. Cansto Coatings is a manufacturer of a variety of specialty coatings in both solvent-based and water-based formulas to supply commercial, industrial and residential needs.

“I’ve known Chuck since 1990, and we could not have found a better person to help our specialty coatings business grow,” says Jim Keene, part owner of Cansto Coatings.

Soeder joins Cansto Coatings after 32 years of experience in the construction chemicals and automotive refinish coatings business. Prior to joining Cansto Coatings, Soeder was the VP for an automotive refinish coatings division. His extensive experience in the construction chemicals, concrete, and industrial, commercial and refinish coatings industries has proven his knowledge in management, strategic planning, leadership, training, channel marketing strategies and account development.

Construction-Put-In-Place Could Top $1 Trillion in 2014

FMI, a provider of management consulting and investment banking to the engineering and construction industry, announces the release of its 2013 U.S. Markets Construction Overview. With construction-put-in-place (CPIP) at the end of 2012 expected to be between $826 to $884 billion, researchers at FMI predict CPIP growth rates to be slightly ahead of GDP in 2013 and 2014. This would place the CPIP at more than $1 trillion by the end of 2014, nearly 6 percent of GDP.

Other predictions include:

• Power CPIP of nearly $100 billion, as well as environmental remediation and conservation work of nearly $7 billion are already at all-time highs
• Residential CPIP will be back to double-digit growth in 2013
• Transportation and healthcare CPIP will reach record levels by 2013
• Education CPIP will continue to rise achieving 2008 numbers by 2016

However, in 2013 commercial buildings, offices, manufacturing facilities, communications systems and lodging CPIP are expected to continue to underperform at an average of 60 percent of 2008 levels, off by more than $115 billion. By 2016 these sectors are predicted to only reach 70 percent of 2008 CPIP. In addition, excitement over the double-digit growth in residential construction is also balanced with the disappointment that by 2016 residential CPIP will still only be at 65 percent ($200 billion behind) the record high in 2006. 

Private equity investors increased attraction to smaller deals. Half of all deals in 2012 are valued at less than $50 million and about 95% of deals are less than $500 million.