Green building outlook strong for non-residential, residential sectors, says report
The U.S. green building market continues to accelerate, according to McGraw-Hill Construction’s 2013 Dodge Construction Green Outlook report. The value of green building has seen growth from $10 billion in 2005 to $78 billion in 2011. In 2012, the total market—non-residential and residential—is expected to be worth $85 billion, and by 2013, overall new green building is projected to rise to between $98 billion and $106 billion. By 2016, this number is expected to reach $204 billion to $248 billion.
According to the report, green building remains a bright spot in a still uncertain economy. Green is expected to represent 44 percent of all commercial and institutional construction in 2012, growing up to 55 percent by 2016. Residential green construction is also on the rise. It is expected that by the end of 2012, green homes will comprise 20 percent of the market, and in 2013 a 22-25 percent share by value is expected, equating to a $34 billion-$38 billion opportunity. By 2016, this share by value is expected to increase to 29-38 percent—an estimated $89 billion-$116 billion, based on the current single-family residential construction forecast.
To break it down further, while education construction is down, green has remained a stronghold at 45 percent, continuing to be the largest opportunity for green building. The office market has the largest share of green with 54 percent in 2012, a bright spot considering the overall expected growth of the sector in the near term.
“We’re seeing tremendous growth in green building, providing a bright light in an otherwise uncertain economy,” said Harvey M. Bernstein, vice president, Industry Insights and Alliances for McGraw-Hill Construction. “Not only does this mean a strong outlook for green building, but also the benefits that go along with that: more jobs, greater financial benefits from green and high performance buildings, stronger competitive positioning for those firms that build green, and healthier work and learning environments for our population.”
Other key points found in the study include:
• Health-related green building labels are taking force in construction specifications, growing more rapidly than any other aspect of green, according to Dodge SpecShare.
• One-third of all home builders in the U.S. expect to be fully dedicated to building green by 2016.
• Green construction jobs are following the green building market; 35 percent have green jobs today.
• Eighty-one percent of executive leaders in corporate America believe the public expects them to engage in sustainability—one of the key forces driving corporations to institutionalize some green efforts. 30 percent of senior executive officers report that they are greening two-thirds of the buildings in their portfolio, with 47 percent expecting to do so by 2015.
A copy of the report can be ordered from: http://construction.com/market_research.
FMI releases third-quarter Construction Outlook Report
“Contrary to election-year rhetoric, the economy is inching its way to improvement, and the construction industry has not stopped working,” according to the third-quarter 2012 Construction Outlook report by FMI, the largest provider of management consulting and investment banking to the engineering and construction industry. The industry forecast is calling for an 8.0 percent increase in total construction put in place for 2013. Contributing to this positive forecast is more robust growth in residential construction, as well as a few strong markets in nonresidential and non-building construction.
The focus for 2013 will be on the movement of private money back into the markets. For the economy to grow at a faster rate with the fiscal cliff looming and state and municipal budgets still in repair mode, it will be the private markets that must lead the way. Total construction put in place for 2013 is forecast to be $892 billion, a solid improvement over the last few years, but still just edging out 2003 levels of construction activity.
Housing starts rose to 603,000 units a year as of September 2012. Single-family permits also rose to a 545,000-unit pace, or 6.7 percent, returning to levels not seen since July 2008.
FMI staff tracks nonresidential construction trends and forecasts by sector:
• Lodging—Hotel developers will renovate before building new properties. Bank loans will be hard to justify until occupancy and room rates remain consistently high.
• Office—Through the first two quarters of 2012, the U.S. office sector has now absorbed 10.4 million sq. ft., 100,000 sq. ft. less of net absorption than was generated over the first six months of 2011. (Jones Lang LaSalle, “United States Office Outlook-Q2 2012). This is not yet enough activity to compare with prerecession highs, but we expect CPIP to improve 4.0 percent in 2013.
• Commercial—Expect more rethinking of commercial construction space to accommodate smaller stores and combining in-store sales with online shopping. Look for increasing multiuse projects.
• Health care—New health care construction will include a growing number of renovation projects to update current facilities for modern hospital design, using more technology in the rooms as well as for improving air quality and reducing energy usage.
• Education—Significantly less funding from states for K-12 schools.
• Religious—The lending environment continues to be a challenge for many congregations.
• Public safety—Despite overcrowding in prisons, we expect public safety construction to remain slow for the next couple of years, at least with only 1 percent growth in 2013 to $10.2 billion.
• Amusement and recreation—Money for sports stadiums will be hard to find from local government investment, and banks will be reluctant to lend to anyone who couldn’t already pay for the project from cash flow.
• Transportation—This remains a strong sector for construction. CPIP is expected to grow 6 percent in 2013 to a total of $38.2 billion for the year. This is due in part to The FAA Modernization and Reform Act will provide $63.6 billion for the agency’s programs between 2012-2015.
• Communications—Growth in communication construction is being powered by an insatiable need for speed and to send and store large amounts of multimedia files over the Internet. One trend that might slow the growth in construction dollars is the trend to use mini cell “towers,” which are small, easily installed boxes that help to maximize spectrum.
• Manufacturing—Manufacturing construction is starting to make a comeback with both new growth in plant output and with some companies repatriating their capacity.
• Power-related—Power construction will continue to be one of the strongest growth sectors for construction. Worthy to note is U.S. Army Corps of Engineers has a proposal out for $7 billion in locally generated renewable energy through power purchase agreements.
• Highway—State budgets will continue to be strained and it will be difficult to get larger projects off the ground. Therefore, funds from the MAP-21 and TIGER grants make up a large percentage of construction put in place included in FMI’s 2013 forecast of $84.7 billion for highways and streets.
• Sewage and waste disposal—Waste-to-energy may be one of the best bets for future work in this sector if more municipalities can find ways to work with private investors.
• Water supply—Expect this sector to struggle to find funds for necessary remediation and construction. Strength in water supply construction will be found in pockets for industrial projects like the mining sector, power and industrial plants.
• Conservation and Development—The 2012 annual budget for the Department of Agriculture eliminates funding for the Resource Conservation and Development (RC&D) and Watershed and Flood Prevention Operations programs. New projects in this sector, like water system projects, will more likely come from cleanup for the mining and energy sector to comply with regulations.
