Dive Brief:
- Commercial real estate services firm JLL has released its Construction Outlook report and predicted that the U.S. nonresidential construction sector should have a robust 2016, but skilled labor shortages and escalating sheet glass costs will add to overall project price tags, Building Design and Construction reported. JLL said all the top construction markets experienced cost increases of a minimum of 1% from the second quarter of 2015 to the fourth quarter of 2015.
- Regionally, JLL said that because of cheaper labor and land, the south is construction's "new frontier," but energy-industry-reliant locales like Houston are experiencing a building drag.
- JLL said growth in construction starts will slow compared to last year but will still outpace the overall economy due to activity in markets like Austin, TX, Chicago, Atlanta and Charlotte, NC. JLL also predicted an uptick in construction profit margins.
Dive Insight:
JLL's report found that sustainable office development played a key role in office renovation activity for 2015, and the real estate advisory firm said that performance in office deliveries versus starts is getting close to pre-recession heights.
JLL added that office space under construction in the fourth quarter of 2015 was almost 9% more than in the fourth quarter of 2014, at 88.5 million square feet. However, JLL called industrial "the shining star" of nonresidential construction, with quarter-over-quarter gains of 23% and deliveries of 178.4 million square feet last year. Dallas (19.7 million square feet) and Atlanta (19.6 million square feet) were industrial’s standout markets.
Some good news on the building materials front: Costs seem to have flattened out, with the exception of sheet glass. In fact, JLL said that some construction companies have snapped up their own glassmakers to mitigate those increased costs.
JLL said a sluggish global economy could force material prices lower, but that won’t prevent wages from continuing to rise as a result of the scramble for skilled workers. The firm said average weekly wages for skilled construction labor increased by 4.2% in December 2015 from December 2014 and that Massachusetts, New York, and Washington, DC, have the highest weekly construction wages, while Georgia, Missouri and Colorado have the lowest.
In CMD’s latest report, the research firm said the value of January nonresidential construction starts rose 9.8% from December to $24.7 billion, a noteworthy increase considering there is typically a December-to-January seasonal decline. Echoing JLL's positive report on nonresidential, CMD said starts were up 12.9% from January 2015 and up 18.6% on a five-year January average.
