Southeast's Slow-Motion Construction Recovery Set to Fast-Forward
Southeast contractors have lamented the frustratingly slow pace of the region’s spotty construction recovery for so long that some might have started to believe that a broader rebound was just so much wishful thinking.
Well, those contractors can think again.
For the first time in several years, McGraw Hill Construction is forecasting that the Southeast region's contract activity will achieve an across-the-board increase within each of its broad construction categories: nonresidential, residential and nonbuilding. Importantly, these regional construction markets will be accelerating significantly, as the company expects a 22% overall gain in the cumulative value of newly signed construction contracts for the states of Florida, Georgia, North Carolina and South Carolina during the coming year. By comparison, the company's national forecast predicts a 9% overall gain in the value of new contracts.
Altogether, that should add up to an estimated $88.7 billion in new contracts during 2014, says McGraw Hill, or nearly $16 billion higher than 2013's expected total. Additionally, 2014’s accelerated pace of contracting will be felt across the entire Southeast region, with overall percentage gains for the individual four states ranging from a low of 17% in North Carolina, to the 45% increase expected for South Carolina.
Arguably most notable among McGraw Hill’s forecast numbers are those for the nonresidential category. Indeed, after bouncing along at an annual volume of about $19 billion for the past four years—ranging from between $18.8 billion and $19.2 billion during 2010-2013—the Southeast’s nonresidential market should generate nearly $24 billion in new contracts during 2014, according to McGraw Hill. That’s enough for a 26% annual gain compared to 2013’s estimate, and the highest dollar amount for this category since 2008.
Looking further into this category’s prospective resurgence, all three nonresidential subcategories—commercial, industrial and institutional—are expected to move up in 2014. The value of commercial contracts, for instance, is forecast to jump 36% during the coming year, generating roughly $10.4 billion in new work. The other major nonresidential sector, institutional, could deliver nearly $11.4 billion in 2014 contracts, for a 21% improvement over 2013.
While nonresidential’s wake-up call is significant, residential will continue to drive the most overall activity. Across the four-state region, 2014 housing contracts should tally nearly $51.6 billion—this category’s highest total since 2007—for a 22% overall increase. That comes on the heels of McGraw Hill’s estimated 35% overall gain in 2013.
Multifamily developments will continue to proliferate across the region, with this sector expected to grow by 19% compared to ’13, delivering more than $8.6 billion in new work. The volume of single-family housing contracts will increase at a greater rate, 23%, for an expected $42.9-billion 2014 total.
Infrastructure work, as noted in McGraw Hill’s nonbuilding category, should rise by 13% overall, for a nearly $13.2-billion overall total. A chart displaying McGraw Hill Construction Dodge's forecast for the four-state Southeast region is included below, followed by a state-by-state breakdown.
| Millions of Dollars | Annual Percent Change | |||
|---|---|---|---|---|
| 2013 Forecast | 2014 Forecast | 2013 | 2014 | |
| Residential | ||||
| Single Family Housing | 34,895 | 42,914 | 35% | 23% |
| Multi Family Housing | 7,243 | 8,644 | 36% | 19% |
| Total Residential | 42,138 | 51,557 | 35% | 22% |
| Nonresidential | ||||
| Commercial | 7,655 | 10,420 | 7% | 36% |
| Industrial | 1,953 | 2,211 | 1% | 13% |
| Institutional | 9,384 | 11,367 | -3% | 21% |
| Total Nonresidential | 18,993 | 23,998 | 1% | 26% |
| Nonbuilding | ||||
| Public Works | 10,593 | 11,283 | 0% | 7% |
| Utilities | 1,054 | 1,875 | -95% | 78% |
| Total Nonbuilding | 11,647 | 13,159 | -61% | 13% |
| TOTAL CONSTRUCTION | 72,778 | 88,714 | -9% | 22% |
| McGraw Hill Construction’s Southeast region includes Florida, Georgia, North Carolina and South Carolina Source: McGraw-Hill Construction Dodge | ||||
Florida
2014 Forecast: $40.4 billion
2013 Forecast: $33.6 billion
Percent Change: +20%
The Sunshine State and its overbuilt housing sector provided a national symbol of the Great Recession. More recently, the state—and Miami in particular—has earned attention for a construction resurgence built partly upon another condominium boom.
According to McGraw Hill, Florida is poised to put considerably more distance between itself and its latest bust period, with a 20% jump in activity expected during the coming year. That would equate to nearly $40.4 billion in new contracts, up from 2013’s estimated $33.6-billion total—and the Sunshine State’s largest overall contracts total since 2007.
Not surprisingly, residential will generate most of Florida’s new construction contracts in the coming year. According to McGraw Hill, roughly $25.8 billion worth of residential contracts will move ahead in ‘14—or about half of the Southeast’s $51.6-billion estimate.
Overall, the company estimates that 2014 single-family contracts will rise 28% to $21.8 billion, which would be the state’s highest tally for this category since 2006. Estimated to rise 14% compared to 2013, multifamily contracts could total just over $4 billion.
Florida’s nonbuilding category—which includes public works and utilities—will be flat in 2014, again generating around $5.5 billion in new contracts. (Notably, of all four states, Florida’s nonbuilding sector is the sole broad category that is not positive.)
Georgia
2014 Forecast: $17.9 billion
2013 Forecast: $15.2 billion
Percent Change: +18%
When it comes to generating construction-based national news, no Southeast state currently comes close to matching Georgia. With the $1.2-billion Atlanta Falcons stadium project already moving forward, the Braves shocked baseball fans and local citizens alike in early November when the team announced a previously secret deal with nearby Cobb County to build a new, $672-million ballpark north of town. A few days later, the Major League Baseball team announced that it would also build a $400-million mixed-use development around the proposed stadium site.
With both the Falcons and Braves stadium projects currently scheduled to kick off construction in 2014, there’s considerably more for Atlanta-area contractors to cheer about than there had been.
The latest news has at least tweaked the tune of Bill Anderson, president of Associated Builders and Contractors of Georgia. In an earlier forecast story, published in November, Anderson lamented Atlanta’s “slow recovery."
"We expect this steady but minor increase to continue throughout 2014,” Anderson said at the time, adding: “The industry’s overall direction is definitely improving, but certainly not at the pace many are accustomed to after a downturn."
After the Braves’ announcement, Anderson called it “very good news for construction in metro Atlanta.” Moreover, with two, instead of just one, stadium projects being built simultaneously, the city’s contractors could suddenly find themselves facing a seriously crunched labor market.
In fact, those two megaprojects will help to boost Georgia’s nonbuilding category—which includes public works—to a resurgence, with McGraw Hill expecting a 24% gain, and a $3.3-billion total for 2014.
But those two projects aren’t the only story in Georgia. Overall, total construction contracts should tally just over $17.9 billion in 2014, an 18% increase compared to 2013’s $15.2-billion estimate.
The nonresidential sector will continue to gain momentum next year. After generating roughly $6 billion in new projects during 2013, McGraw Hill expects nearly $6.9 billion in new nonresidential contracts to move forward during ’14, for a 14% improvement. Within this category, institutional projects will deliver the largest volume, with an estimated $3.8 billion total, while the commercial subcategory should generate nearly $2.4 billion in new work. Industrial contracts, meanwhile, will slow by roughly a third, with about $650 million in new projects expected.
Meanwhile, housing should produce more than $7.7 billion in new contracts. McGraw Hill expects single-family housing to generate about $6.3 billion of that total, a gain of about 17% compared to 2013, while the company expects to see nearly $1.4 billion in multifamily contracts.
North Carolina
2014 Forecast: $18.4 billion
2013 Forecast: $15.7 billion
Percent Change: +17%
North Carolina’s construction market has been the Southeast’s steadiest over the past five years. From 2009 to 2013, the Tar Heel State recorded the following totals for new contracts: $14.9 billion; $15 billion; $15.2 billion; $15.7 billion; and $15.7 billion.
In 2014, however, North Carolina is going to change things up a bit, with McGraw Hill forecasting nearly $18.4 billion in new contracts, or about 17% better than a year ago.
Leading the resurgence—in terms of percentage growth, at least—will be the nonresidential sector, which should generate more than $5.2 billion in new contracts, which would represent a 50% jump, says McGraw Hill. That percentage growth is due partly to the fact that this category suffered its worst year in at least a decade during 2013, when it tallied just $3.5 billion in new contracts.
The nonresidential subcategory improving the most, industrial, could generate $553 million in new contracts, for a 68% gain. Meanwhile, institutional contracts will generate the most volume in the nonresidential category, adding an estimated $2.4 billion to the market, a 35% gain compared to 2013.
Contracts for nonbuilding projects should accelerate by 17% overall, to total roughly $2.8 billion in 2014, says McGraw Hill. The vast majority of that activity will come from the public-works sector, with the company estimating more than $2.7 billion in new contracts here.
Residential contracts should improve by 6% compared to this past year and total approximately $10.3 billion in 2014, says McGraw Hill. That volume would be this sector’s highest dollar volume since 2007. Multifamily contracts could rise to their highest dollar volume in at least a decade, with nearly $2.6 billion in new projects anticipated.
South Carolina
2014 Forecast: $12 billion
2013 Forecast: $8.3 billion
Percent Change: +45%
South Carolina has gained notice in recent years for its ability to attract manufacturing-related projects. Boeing’s Dreamliner plant in North Charleston was arguably the highest-profile of these, but there have been numerous other notable projects since then for companies such as Continental Tire, Johnson Controls and others.
The state is "starting to be the best place in the world for manufacturing production,” says Scott Moss, president of Fort Lauderdale, Fla.-based construction manager Moss & Associates, which is currently building a manufacturing plant for a Chinese company. “It’s got reliable power, predictable labor as it relates to cost, and it has affordable land,” he says.
For 2014, the Southeast’s smallest state will experience the greatest percentage increase in new contracts, says McGraw Hill. The company expects more than $12 billion worth of new projects to move forward during the coming year, which would equate to a 45% overall gain compared to 2013. All three broad construction categories will show considerable improvement.
Residential contracts—with the vast majority as single-family—will surge by 46%, McGraw Hill predicts, generating an estimated $7.7 billion in new projects.
Nonresidential will also grow markedly, with that category expected to produce nearly $2.9 billion in new contracts during the coming year, a roughly 41% improvement. Institutional contracts should generate nearly $1.3 billion in new activity, while commercial contracts could total $960 million. Meanwhile, the company expects industrial projects to tally around $621 million during the coming year.
The nonbuilding category should increase by about 50%, says McGraw Hill, which would result in nearly $1.5 billion in new contracts moving ahead in 2014. Of that total, public works would generate about $863 million in new projects, while utility contracts could tally around $596 million.
