Category: Construction + Economy

Dodge Momentum Index Increases to Start 2021

The Dodge Momentum Index increased 3.1% in January to 139.4 (2000=100) from the revised December reading of 135.2. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. January’s increase marked the highest level in the Momentum Index since the COVID-19 pandemic began.

The Dodge Momentum Index increased 3.1% in January to 139.4 (2000=100) from the revised December reading of 135.2.

The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The commercial component of the Momentum Index moved 9.9% higher, offsetting an 11.7% decrease in the institutional component.

January’s increase marked the highest level in the Momentum Index since the COVID-19 pandemic began. While certainly positive news, the Momentum Index is also sending a warning that the construction sector’s recovery may be very uneven in the months ahead. Institutional planning hit its lowest level since the Momentum Index began in 2002 as state and local governments pull back on building plans in the wake of growing budget deficits. Conversely, commercial planning is at its highest level since before the Great Recession, fueled by an increasing number of warehouse projects and to a somewhat lesser degree office projects. On a year-over-year basis the overall Momentum Index is 2.2% below January 2020. The commercial component is up 12.3% year-over-year, while the institutional component is down 27.7%.

In January, 13 projects each with a value of $100 million or more entered planning. The leading commercial projects were a $420 million Walmart distribution center in Lancaster TX and a $355 million Amazon warehouse (Project Roxy) in Arlington WA. The leading institutional projects were the $175 million Norman Regional Healthplex expansion in Norman OK and the $156 million Mercy Health Hospital in Kings Mills OH.

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Nonresidential Construction Starts End 2020 on a Sour Note

Total construction starts lost 5% in December, falling to a seasonally adjusted annual rate of $784.3 billion. Nonresidential building starts fell 11% during the month, while nonbuilding starts were 5% lower. Residential starts were essentially flat over the month. Starts were lower in three of the four regions in December; the South Central was the only region to post an increase.

Total construction starts lost 5% in December, falling to a seasonally adjusted annual rate of $784.3 billion. Nonresidential building starts fell 11% during the month, while nonbuilding starts were 5% lower. Residential starts were essentially flat over the month. Starts were lower in three of the four regions in December; the South Central was the only region to post an increase.

For the full year, total construction starts fell 10% to $766.3 billion. Nonresidential building starts saw the steepest drop, losing 24%, while nonbuilding starts fell 14%. Residential construction starts ended 2020 up 4% thanks to strong single family activity. In December, the Dodge Index fell 5% to 166 (2000=100) from the 174 reading in November. For the full year, the Dodge Index averaged 163, a 10% decline from 2019’s average.

“The roller coaster year of 2020 is over but not forgotten,” stated Richard Branch, Chief Economist for Dodge Data & Analytics. “The scars from the pandemic and recession will be long lasting and resulted in significant declines across most construction sectors. Single family housing, warehouse, and highway and bridge starts were bright spots that cannot be understated for their gains. There will be difficult months ahead for the economy and for construction starts as COVID-19 cases mount. However, the continued roll out of vaccines means 2021 will be a better year.”

Nonbuilding construction fell 5% in December to a seasonally adjusted annual rate of $185.3 billion. Declines were broad based across the sector, with highways & bridges, environmental public works and miscellaneous nonbuilding starts all falling in December. The utility/gas plant category rose 70% in the month due to the start of two large power generation facilities.

Nonresidential building moved 11% lower in December to a seasonally adjusted annual rate of $225.3 billion following a sizeable increase in the previous month. Commercial starts fell 23% over the month as office, hotel, and warehouse starts all posted double-digit declines. Institutional starts fell 5%, while manufacturing starts rose thanks to the largest nonresidential building project to get started in December, the $600 million Gulf Coast Ammonia Plant in Texas City TX.

In 2020, nonresidential building starts lost 24% to $239.9 billion — the lowest level since 2015. Commercial starts tumbled 26% over the year, with warehouse construction eking out a 1% gain in 2020. Institutional starts fell 13% last year, while manufacturing starts dropped 59%.

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Housing Starts End 2020 Strong; Risks Ahead

While nonresidential construction activity contracted in 2020 and is projected for another decline in 2021, residential construction was strong last year. Led by a solid, double-digit gain in single-family starts, overall housing starts increased 5.8% to a seasonally adjusted annual rate of 1.67 million units, according to a recent report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

While nonresidential construction activity contracted in 2020 and is projected for another decline in 2021, residential construction was strong last year. Led by a solid, double-digit gain in single-family starts, overall housing starts increased 5.8% to a seasonally adjusted annual rate of 1.67 million units, according to a recent report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The December reading of 1.67 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 12% to a 1.34 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 13.6% to a 331,000 pace.

Total housing starts for 2020 were 1.38 million, a 7% gain over the 1.29 total from 2019. Single-family starts in 2020 totaled 991,000, up 11.7% from the previous year. Multifamily starts in 2020 totaled 389,000, down 3.3% from the previous year.

“Builder concerns about a changing regulatory landscape may have triggered many to move up their plans to pull permits and put shovels to the ground,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. “Our latest builder sentiment survey suggests somewhat softer numbers ahead due to rising building costs and an uncertain regulatory climate.”

“The 1.34 million single-family starts pace in December is the highest since September 2006,” said NAHB Chief Economist Robert Dietz. “And while NAHB is forecasting further production increases in 2021, the gains will tempered by ongoing supply-side challenges related to material costs and delivery times, a dearth of buildable lots and regional labor shortages that continue to exacerbate affordability woes.”

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AIA: Nonresidential Building Spending to Decline Through 2021, Bounce Back in 2022

Slowing demand at architecture firms in 2020 is expected to contribute to a projected 5.7 percent decline in construction spending for 2021, according to a new consensus forecast from The American Institute of Architects (AIA).

Slowing demand at architecture firms in 2020 is expected to contribute to a projected 5.7 percent decline in construction spending for 2021, according to a new consensus forecast from The American Institute of Architects (AIA).

The AIA Consensus Construction Forecast Panel—comprised of leading economic forecasters—expects steep declines this year in construction spending on office buildings, hotels, and amusement and recreation centers. Health care and public safety are the only major sectors that are slated to produce gains in 2021.

Growth in nonresidential construction is expected for 2022, with 3 percent gains projected for the overall building market matched by both the commercial and institutional sectors.

“The December jobs report confirmed that the economy needs additional support in order to move to a sustainable economic expansion,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “As pandemic concerns begin to wane and economic activity begins to pick up later in 2021, there is likely to be considerable pent-up demand for nonresidential space, leading to anticipated growth in construction spending in 2022.”

Click here to see all the forecasts by the major construction organizations.

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Architectural Billings Lose Ground in December 2020

Demand for design services from U.S. architecture firms took a pointed dip in December 2020, according to the American Institute of Architects (AIA).

Demand for design services from U.S. architecture firms took a pointed dip in December 2020, according to the American Institute of Architects (AIA).

The pace of decline during December accelerated from November, posting an Architecture Billings Index (ABI) score of 42.6 from 46.3 (any score below 50 indicates a decline in firm billings). Meanwhile, the pace of growth of inquiries into new projects remained flat from November to December with a score of 52.4, though the value of new design contracts stayed in negative territory with a score of 48.5.

“Since the national economic recovery appears to have stalled, architecture firms are entering 2021 facing a continued sluggish design market,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “However, the recently passed federal stimulus funding should help shore up the economy in the short-term, and hopefully by later this year there should be relief as COVID vaccinations become more widespread. Recent project inquiries from prospective and former clients have been positive, suggesting that new work may begin picking up as we move into the spring and summer months.”

Key ABI highlights for December include:

  • Regional averages: South (46.8); Midwest (43.6); West (43.4); Northeast (38.8)
  • Sector index breakdown: mixed practice (48.0); commercial/industrial (47.2); multi-family residential (46.1); institutional (38.5)
  • Project inquiries index: 52.4
  • Design contracts index: 48.5

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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Survey: General Contractors Pessimistic about 2021

Construction employment increased by 51,000 jobs in December, with gains for nonresidential as well as residential contractors, according to an analysis by the Associated General Contractors of America of government data. Association officials, however, cautioned that its latest survey shows widespread pessimism among contractors about the volume of work available in 2021.

Construction employment increased by 51,000 jobs in December, with gains for nonresidential as well as residential contractors, according to an analysis by the Associated General Contractors of America of government data. Association officials, however, cautioned that its latest survey shows widespread pessimism among contractors about the volume of work available in 2021.

“December’s employment gains likely reflect milder weather than usual for the month rather than sustained demand for projects,” said Ken Simonson, the association’s chief economist. “In fact, our survey found contractors expect the volume of work is likely to decline for nearly all nonresidential project types, and most firms have experienced project cancellations or postponements.”

Construction employment climbed to 7,413,000 in December 2020, an increase of 0.7 percent compared to November. However, employment in the sector remains down by 226,000 or 3.0 percent since the most recent peak in February.

Residential construction has weathered the pandemic much better than nonresidential segments, Simonson added. While both parts of the industry had huge job losses from the pre-pandemic peak in February to April, residential building and specialty trade contractors have now recouped all of the employment losses they incurred. In contrast, nonresidential construction employment—comprising nonresidential building, specialty trades, and heavy and civil engineering construction—was 241,000 lower in December than in February.

Unemployment in construction nearly doubled in 2020. The industry’s unemployment rate in December was 9.6 percent, compared to 5.0 percent in December 2019. A total of 930,000 former construction workers were unemployed, up from 489,000 a year earlier. Both figures were the highest for December since 2013.

The association’s 2021 Construction Hiring and Business Outlook Survey found that 78 percent of contractors reported a project had been canceled or postponed, while only 25 percent reported winning new or additional work as a result of the pandemic, the economist noted. He said that suggests many firms will have to lay off employees once current projects wrap up. The survey included responses from more than 1,300 contractors that perform all types of construction other than homebuilding.

Association officials urged the new Congress and incoming Biden administration to enact measures to boost investments in all manner of public infrastructure. They added that Washington needs to backfill depleted state and local construction budgets so those new federal infrastructure investments can be more effective in boosting demand and construction employment.

“As Washington officials pivot from providing pandemic relief to focusing on rebuilding the economy, infrastructure needs to be at the top of their agenda,” said Stephen E. Sandherr, the association’s chief executive officer. “There is a real chance to come out of the pandemic with a stronger and more efficient economy if we can act now to rebuild aging and over-burdened infrastructure.”

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AIA Condemns Capitol Hill Violence

The American Institute of Architects (AIA) recently issued a statement by Peter Exley, FAIA & Robert Ivy, FAIA condemning the violence at Capitol Hill on January 6. Their statement follows.

The American Institute of Architects (AIA) recently issued a statement by Peter Exley, FAIA & Robert Ivy, FAIA condemning the violence at Capitol Hill on January 6. Their statement follows.

Destruction is not an acceptable form of expression. Violence is not a viable policy position. Neither has a place in civil society. AIA categorically condemns the violence and destruction caused by rioters bent on disrupting the nation’s peaceful transfer of power.

The riots were an appalling act of entitlement and weakness. They were the antithesis of our country’s founding ideals. It was also obvious that the latent response of law enforcement to the mob was yet another reminder of the significant differences between the policing of white vs brown and black people.

The insurgents, their supporters, and instigators do not understand what makes our country strong and enduring: respect for differences, reasoned discourse, and above all, the belief that America’s best days are ahead. There is no better symbol of those ideals than the powerful United States Capitol building.

But the United States Capitol is also a reminder of the nation’s original sins: The dislocation of native peoples and the enslavement of Africans. It sits on the ancestral land of the Nacotchtank, Piscataway and Pamunkey peoples. And the building was created with the extensive use of the labor and skill of enslaved Africans. That melding of noble aspirations and profound failings is foundational to the American experiment.

We are not a perfect union, yet we continue to strive to be the more perfect union envisioned 233 years ago. That relentless centuries-long pursuit is what inspires millions around the world and gives us hope.

In the spirit of hope, in a few days we will celebrate the life and exceptional contribution of Dr. Martin Luther King Jr. Dr. King dedicated his life to bending the historical arc of our nation closer toward universal justice.

It is also fitting that we will witness the transition of power that symbolizes the collective responsibility of “we the people” to work together toward a future that is fairer, healthier, and more sustainable for everyone, everywhere.

Both are well-timed reminders of what is best about our nation.

In the coming days, as we begin a new chapter in America’s history, we should all remember that what unites us – the belief that we are created equal and have a responsibility to leave our society better than we found it – is far more important and enduring than suspicion and division.

As architects, we are committed to those ideals.

Dr. King’s words resonate today, “All mankind is tied together; all life is interrelated, and we are all caught in an inescapable network of mutuality, tied in a single garment of identity. Whatever affects one directly, affects all indirectly.”

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Architecture Billings Lose Ground in November

Architecture firm billing activity contracted once again in November 2020 after two months of a slowing decline, according to the American Institute of Architects (AIA).

Architecture firm billing activity contracted once again in November 2020 after two months of a slowing decline, according to the American Institute of Architects (AIA).

The pace of decline during November accelerated from October, posting an Architecture Billings Index (ABI) score of 46.3 from 47.5 (any score below 50 indicates a decline in firm billings). The pace of inquiries into new projects slowed, but remained positive with a score of 52.0, however the value of new design contracts dipped back into negative territory with a score 48.6.

“In previous design cycles, we typically haven’t seen a straight line back to growth after a downturn hits,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “The path to recovery is shaping up to be bumpier than we hoped for. While there are pockets of optimism in design services demand, the overall construction landscape remains depressed.”

Key ABI highlights for November include:

  • Regional averages: Midwest (50.1); West (48.3); South (46.7); Northeast (38.7)
  • Sector index breakdown: multi-family residential (52.2); mixed practice (49.5); commercial/industrial (47.5); institutional (41.9)
  • Project inquiries index: 52.0
  • Design contracts index: 48.6

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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Architecture Billings Remained Stalled in October

While architectural billings failed to show much progress during October 2020, signs of improving business conditions at firms have emerged, according to the American Institute of Architects (AIA).

While architectural billings failed to show much progress during October 2020, signs of improving business conditions at firms have emerged, according to the American Institute of Architects (AIA).

The pace of decline during October remained at about the same level as in September, posting an ABI score of 47.5 (any score below 50 indicates a decline in firm billings). Meanwhile, firms reported a modest increase in new project inquiries—growing from 57.2 in September to 59.1 in October—and newly signed design contracts jumped into positive territory for the first time since the pandemic began, with a score of 51.7.

“Though still in negative territory, the moderating billings score along with the rebound in design contracts and inquiries provide some guarded optimism,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The pace of recovery will continue to vary across regions and sectors.”

Key ABI highlights for October include:

  • Regional averages: West (50.4); Midwest (49.4); South (45.8); Northeast (44.9)
  • Sector index breakdown: multi-family residential (55.1); mixed practice (52.7); commercial/industrial (48.0); institutional (42.2)
  • Project inquiries index: 59.1
  • Design contracts index: 51.7

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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Preliminary 2018 CBECS Results Released

The U.S. Department of Energy recently released preliminary results of the 2018 Commercial Buildings Energy Consumption Survey (CBECS). Conducted every five (approximately) years, the CBECS estimates characteristics for the national building stock.

The U.S. Department of Energy recently released preliminary results of the 2018 Commercial Buildings Energy Consumption Survey (CBECS). Conducted every five (approximately) years, the CBECS estimates characteristics for the national building stock.

The preliminary data release includes number of buildings, square footage, and age of buildings by size, principal activity, year of construction, and census region and division.

The next release (in spring or summer of 2021) will include more detailed building characteristics, which I’m hoping will again include adoption of various lighting strategies.

Some key takeaways:

  • Number of buildings grew 6% since 2012, floorspace 11%; building size continues to grow faster than number of buildings
  • Most buildings are small, though large buildings have more total floorspace
  • Office, warehouse/storage, and service buildings are most common type
  • Fastest-growing building markets since 2012 were lodging, service, and public assembly
  • More than 50% of buildings were built 1960-1999, with 25% built since 2000

Click here to check it out.

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