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TradeWinds

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FMI Releases Q1-2012 Construction Outlook Report
Construction Put in Place Forecasted to Increase 5 percent from 2011

FMI (www.fminet.com), the largest provider of management consulting and investment banking to the engineering and construction industry, releases the first-quarter, 2012 Construction Outlook Report. FMI's forecast for total construction put in place in 2012 is a 5 percent increase compared to 2011, or $826.3 billion. The last time construction put in place was at this level was 2000-2001.

Economic Indicators:
Despite slow growth projections and rising gasoline prices, the GDP is still growing and consumers are still spending, reflected in the Conference Board's Consumer Confidence Index® increasing to 70.8 in February compared to 70.4 a year ago. Along with the Federal Reserve's intervention, these factors have served to keep growth slow and inflation in check.

Residential Construction:
In order for residential construction to achieve the 8 percent increase projected and top $264.4 billion in 2012, a number of factors still have to fall into place:
  • Reduction in the current inventory of homes
  • Lenders willing to lend on reasonable terms
  • Steady improvement in hiring

Nonresidential Construction:
Projections indicate a 4 percent increase in nonresidential buildings for 2012, topping $341 billion, with slightly higher growth in 2013 to $361 billion. Nonresidential contractors are facing many of the same problems as residential contractors. In addition, competition is fierce, with low price still the name of the game. Project owners who are ready to restart their building programs are expecting hungry contractors to submit very low bids. One of the keys for growth will be the return of private investment in construction. Additionally, federal, state and local government construction have been dialed back until budgets are in better repair and tax revenues return to levels that are more normal. Research indicates that there are signs this is starting to happen.

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.

About FMI:
FMI is the largest provider of management consulting, investment banking and research to the engineering and construction industry. We work in all segments of the industry providing clients with value-added business solutions, including:

  • Strategy Development
  • Market Research and Business Development
  • Leadership and Talent Development
  • Project and Process Improvement
  • Mergers, Acquisitions and Financial Consulting
  • Compensation Data and Consulting

Founded by Dr. Emol A. Fails in 1953, FMI has professionals in offices across the U.S. FMI delivers innovative, customized solutions to contractors; construction materials producers; manufacturers and suppliers of building materials and equipment; owners and developers; engineers and architects; utilities; and construction industry trade associations. FMI is an advisor you can count on to build and maintain a successful business, from your leadership to your site managers. For more information, visit www.fminet.com.

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January Construction Recedes 2 Percent

The value of new construction starts dropped 2% in January to a seasonally adjusted annual rate of $402.2 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Both nonresidential building and housing settled back from December, while the non-building construction sector managed to register a modest gain with the help of a rebound for new electric utility starts. On an unadjusted basis, total construction starts in January were reported at $27.0 billion, down 14% from the same month a year ago. For the twelve months ending January 2012 versus the twelve months ending January 2011, which lessens the volatility present in one-month comparisons, total construction starts were down 3%.

The January statistics lowered the Dodge Index to 85 (2000=100), compared to December's reading of 87. Over the course of 2011, the Dodge Index moved within the range of 81 to 101, with the average for last year coming in at 90. "For construction starts, the year 2012 got off slowly, with activity retreating further into the lower half of its recent range," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "This is consistent with the view that construction is still struggling to achieve upward momentum, even with the recent improvement shown by the U.S. economy. There were some positive signs for construction during 2011, such as a stronger volume for multifamily housing, a record high for new electric utility starts, and even gains for a few commercial structure types (hotels and warehouses). However, these positives were offset by declines for single family housing, public works, and institutional building. For 2012, both public works and institutional building will continue to be affected by diminished federal funding, as well as by tight state and local budgets. Single family housing may draw some benefit from the recent federal-state agreement with major banks to rework troubled mortgages, but homebuyer demand will still be restrained by more stringent bank lending standards, which limits any construction upturn. While multifamily housing appears on the upswing and commercial building seems to be turning the corner, both will require more available bank financing. There were some signs that this was taking place during the first half of 2011, before concerns about the debt crisis in Europe during the second half of 2011 caused banks to adopt a more wait-and see approach."

Nonresidential building in January slipped 1% to $139.9 billion (annual rate). On the institutional side, weaker activity was reported for most of the structure types. The educational building category, which fell 12% during 2011, dropped 3% in January relative to the previous month. There were several noteworthy education-related projects that reached groundbreaking in January, including three research and laboratory facilities in these locations – Baltimore MD ($144 million), Boston MA ($93 million), and Berkeley CA ($86 million), but they were not enough to offset the downward trend for this category. In similar fashion, the public buildings category in January included the start of a large courthouse in San Bernardino CA ($272 million) and a large detention facility in Detroit MI ($220 million), but for the month contracting was still down 23%. Amusement-related projects and churches in January were each down 6%, while transportation terminal work dropped 36%. The one institutional structure type that registered a January gain was healthcare facilities, which soared 105% due to the start of a $583 million replacement hospital in Denver CO.

On the commercial side, the recent upward trend for hotels and warehouses paused in January, with hotels down 16% and warehouses down 11%. The decline for hotels came despite the start of a $180 million resort hotel in Lake Buena Vista FL and an $87 million addition to a convention center hotel in Chicago IL. Store construction in January was able to move up 12% from its depressed December amount, and office construction advanced 20% with support coming from the January start of a $113 million office building in Cambridge MA and an $85 million data center in West Des Moines IA. The manufacturing plant category in January plunged 39%, sliding back from the improved activity that was reported during the fourth quarter of last year.

Residential building, at $134.5 billion (annual rate), dropped 8% in January. Multifamily housing fell 26%, retreating from the elevated volume reported in December. January's amount for multifamily housing was still 5% above the average monthly pace for 2011 as a whole, a year in which the annual total for multifamily housing climbed 23%. The largest multifamily projects reported as January starts were the following – a $90 million apartment village in San Jose CA, a $78 million apartment building in Los Angeles CA, and a $73 million university-related apartment complex in Washington DC. Single family housing in January settled back 1%, as the result of this regional pattern – the Midwest, down 4%; the South Atlantic, down 3%; the Northeast, down 2%; the West, up 1%; and the South Central, up 2%. Single family housing was able to show some gains during the latter months of 2011, with the average pace in last year's second half up 7% relative to the very weak first half, but Murray noted that "January's
essentially flat activity indicates that single family housing has yet to move from what is still a very depressed level to even a modest recovery."

Non-building construction in January increased 3% to $127.9 billion (annual rate). Much of the upward lift came from electric utilities, which jumped 36% relative to a lackluster December. The electric utility category for 2011 as a whole surged 46%, reaching a new high in current dollar terms, although activity did slide back during the final two months of last year. Large electric utility projects that boosted contracting in January were a $1.1 billion solar energy facility in California, a $680 transmission line project in California, and a $150 million wind farm in Indiana. The public works categories in January showed varied behavior. Highway and bridge construction dropped 9%, continuing to see the reduced activity that was present for much of 2011, in which the annual amount dropped 5% after stimulus-supported gains in the prior two years. Water supply construction in January was down 5%, while river/harbor development fell a more substantial 26%. January gains were posted by sewer construction, up 5%; and miscellaneous public works, up 18%. The miscellaneous public works category includes a diverse set of project types, such as site work and mass transit, and the January increase reflected these large projects – $406 million for site work at a mining development in Michigan, $234 million for a light rail project in California, and $157 million for work on a commuter rail corridor in Florida.

The 14% decline for total construction on an unadjusted basis in January 2012 relative to January 2011 was due to this performance by major sector – nonresidential building, down 16%; residential building, up 17%; and non-building construction, down 30%. Last year's January amount for non-building construction featured several massive projects, including a $2.5 billion solar power facility in California and $2.1 billion for work on the LBJ Freeway in Dallas TX; the comparison to these projects contributed to the 30% year-over-year drop for non-building construction. By region, total construction for January 2012 compared to January 2011 revealed decreased activity in the South Central, down 32%; the Northeast, down 28%; and the West, down 11%; while gains were reported for the South Atlantic, up 1%; and the Midwest, up 16%.

The 3% decline for total construction on a twelve-month moving total basis, meaning the twelve months ending January 2012 versus the twelve months ending January 2011, was due to this pattern by major sector – nonresidential building, down 4%; residential building, up 4%; and non-building construction, down 8%. By region, the twelve months ending January 2012 showed the following behavior for total construction compared to the previous twelve months – the Northeast and Midwest, each down 9%; the South Central, down 8%; the West, up 2%; and the South Atlantic, up 9%.

About McGraw-Hill Construction:
McGraw-Hill Construction connects people, projects, and products across the construction industry. For more than a century, it has remained North America's leading provider of project and product information, plans and specifications, and industry news, trends, and forecasts. McGraw-Hill Construction serves more than one million customers in the global construction industry through Dodge, Sweets, Architectural Record, Engineering News-Record, GreenSource, and SNAP. To learn more, visit www.construction.com or follow @mhconstruction on Twitter.

About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies is a leading global financial information and education company that helps professionals and students succeed in the knowledge economy. Leading brands include Standard and Poor's, McGraw-Hill Education, Platts energy information services, and J.D. Power and Associates. The Corporation has approximately 21,000 employees with more than 280 offices in 40 countries. Sales in 2010 were $6.2 billion. Additional information is available at www.mcgraw-hill.com.


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Architecture Billings Index Remains Positive for Third Straight Month
West region continues to lag behind rest of country in demand for design services

On the heels of consecutive months of strengthening business conditions, the Architecture Billings Index (ABI) has now reached positive territory three months in a row. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 50.9, following a mark of 51.0* in December. This score reflects a slight increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.2, down just a notch from a reading of 61.5 the previous month.

You can see this press release online here: http://www.aia.org/press/releases/AIAB093178

* Every January the AIA research department updates the seasonal factors used to calculate the ABI, resulting in a revision of recent ABI values.

“Even though we had a similar upturn in design billings in late 2010 and early 2011, this recent showing is encouraging because it is being reflected across most regions of the country and across the major construction sectors,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “But because we still continue to hear about struggling firms and some continued uncertainly in the market, we expect that overall economic improvements in the design and construction sector to be modest in the coming months.”

Key January ABI highlights:
  • Regional averages: Midwest (53.7), South (51.6), Northeast (50.7), West (45.6)
  • Sector index breakdown: multi-family residential (52.6), commercial / industrial (52.2),
  • institutional (51.1), mixed practice (46.1)
  • Project inquiries index: 61.2

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

About the AIA Architecture Billings Index
The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction spending activity. The diffusion indexes contained in the full report are derived from a monthly “Work-on-the-Boards” survey that is sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI. These monthly results are also seasonally adjusted to allow for comparison to prior months. The monthly ABI index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline. The regional and sector data are formulated using a three-month moving average. More information on the ABI and the analysis of its relationship to construction activity can be found in the White Paper Architecture Billings as a Leading Indicator of Construction: Analysis of the Relationship Between a Billings Index and Construction Spending on the AIA web site.

About The American Institute of Architects
For over 150 years, members of the American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. Members adhere to a code of ethics and professional conduct to ensure the highest standards in professional practice. Embracing their responsibility to serve society, AIA members engage civic and government leaders and the public in helping find needed solutions to pressing issues facing our communities, institutions, nation and world. Visit www.aia.org.

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Construction Materials Prices Rise Moderately In January But Show Signs Of Accelerating; Contractors Urge Prompt Enactment Of Funding Bills

Construction Association Notes that Recent Slowdown in Year-over-Year Producer Price Change Has Been Reversed for Several Key Items; Delay in Passing Highway Funding Means Projects Will Be Costlier

The cost of construction materials is showing signs of accelerating after moderating in January, according to an analysis of producer price index figures and recent market information released today by the Associated General Contractors of America. Ongoing price increases underscore the urgency of funding public construction projects promptly, association officials said.

"Cost increases have slowed in recent months but haven't disappeared," said Ken Simonson, the association's chief economist. "In fact, today's producer price index report may be the low point, as manufacturers and commodities markets are signaling that bigger increases may be just around the bend."

Simonson noted that the price index for construction inputs — a weighted average of all materials used in construction plus items consumed by contractors, such as diesel fuel and tires on equipment — rose 0.4 percent from December to January and 4.5 percent over the past 12 months. Those increases were slightly higher than the rise in the overall producer price index for finished goods and the smallest year-over-year change for construction materials since 2010.

"Unfortunately, this slowdown has already ended for some key materials," Simonson warned. "Crude oil and diesel prices have moved up significantly since the January price index data were collected. Producers of plastic pipe have notified customers of 8 percent increases, effective March 1. And copper futures have jumped from levels of a few weeks ago, making increases in pipe and wiring prices likely."

Association officials said the acceleration in materials costs adds to the urgency of getting a long-term federal highway and transit funding bill enacted. They said Congress and federal officials should join the contractors association and others concerned about transportation infrastructure in making transportation job #1.

"Each month that Congress puts off providing long-term funding for needed infrastructure projects costs taxpayers double," said Stephen E. Sandherr, the association's chief executive officer. "They pay now in congested and deteriorated roads, and they'll pay more when materials are finally purchased. Congress should get a bill to the president without further short-term extensions, and he should sign it."

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Community Service Day Comes To Orlando Next Week In Conjunction With The 2012 International Roofing Expo

Through the Community Service Day taking place on Tuesday, February 21, 2012, attendees and exhibitors of the 2012 International Roofing Expo® [IRE] will volunteer to help renovate three home of families in need.

Taking place from 9:30 am - 4:00 pm, the International Roofing Expo has partnered with the NRCA’s Disaster Relief Committee and the Central Florida chapter of Rebuilding Together, a non-profit, volunteer-based program that repairs and rehabilitates homes and non-profit community facilities.

Community Service Day is sponsored by Sika Sarnafil, a thermoplastic (PVC), single-ply, commercial roofing and waterproofing manufacturer who will be exhibiting in booth #525.

"The International Roofing Expo is so pleased to be part of this exciting day,” said Lindsay Roberts, Director of the Expo. “Our attendees and exhibitors who volunteer to this vital cause will help provide a small piece of the American dream to families in need."

Renovations will be performed on the home of Gwen Zachery, a 62-year disabled Orlando resident whose disability and fixed income have limited her ability to provide adequate maintenance to her home which was suffered massive water damage and is in desperate need of fence repair and exterior painting.

Renovations will also take place on the home of Robert Washington, an Army veteran who is disabled, as is his wife. Minor repairs are need to the exterior of the house, which also needs to be weatherproofed by sealing and painting the exterior.

The third house to be renovated belongs to Lenzo and Geraldine Murrrell, Orlando residents since 1980 who are now unemployed. In addition to plumbing issues, the house needs to be repaired, primed, sealed and painted. Weathered from the harsh sunlight and hurricane force winds, the 16-year old roof was recently replaced with shingles donated by Owen Corning and labor donated by Springer-Peterson Roofing & Sheet Metal.

Tecta America completed the final component of this project by donating product and service on a transitional house for homeless and or abused women in the Orlando area.

"This is such a worthy cause to lend a helping hand to those less fortunate,” said Bill Good, Executive Vice President of NRCA, the show’s official sponsor. "This is a great opportunity to support the roofing industry, while giving back to the Orlando community."

Attendees and exhibitors who wish to volunteer for the event and/or make a tax-deductible monetary donation can do so at the same time they register to attend the show at www.TheRoofingExpo.com. There is a $25 fee that includes lunch and transportation. All volunteers must be 18 years of age or older and will be asked to sign a Waiver of Liability Form.

To donate product and/or materials, please contact Ed Green, Executive Director at Rebuilding Together, at 407-340-2588 or visit www.RTOrlando.org.

The 2012 International Roofing Expo will take place February 22-24, in South Hall A at the Orange County Convention Center in Orlando, Florida USA. Visit www.TheRoofingExpo.com/attendee to register for the event, as well as find complete details about Community Service Day, exhibitors and educational conference information.

For more information about the IRE, please visit www.TheRoofingExpo.com/attendee or call 972.536.6415 or 800.684.5761. Additional show information can be found on Facebook at http://www.facebook.com/RoofingExpo, LinkedIn at http://www.linkedin.com/groups?gid=1963938 and Twitter http://www.twitter.com/RoofingExpo. Twitter users can follow the show using #RoofingExpo or @RoofingExpo.

About International Roofing Expo
The International Roofing Expo is the must-attend event for commercial and residential roofing professionals to stay abreast of market directions, trends and cutting-edge technology. Formerly owned by NRCA, the show was sold to Hanley Wood Exhibitions in May 2004. The official show sponsor is NRCA; the official show publication is Roofing Contractor; and the official residential publication is Replacement Contractor.

About Hanley Wood
Hanley Wood is comprised of four platforms: Business Media, which publishes more than 30 magazines, featuring Builder, Remodeling and Architect magazine, along with related Web sites, e-newsletters, and conferences; Exhibitions, which produces marquee events such as World of Concrete, bringing residential and commercial construction professionals face-to-face with manufacturers, suppliers, distributors, and service providers, and also manages events in other industries; Market Intelligence, which collects and aggregates proprietary data sets that capture hundreds of pieces of profile and material information about housing developments in more than 75 housing markets; and Marketing, which plans, creates, and executes strategic and integrated marketing solutions for its clients. Visit www.hanleywood.com.

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GAF Introduces Exclusive Web Portal for Architects and Specifiers

GAF, North America’s largest roofing manufacturer, announces the creation of the Architects’ Portal, an exclusive web area accessible from the GAF home page (www.gaf.com) for architects and specification professionals. It can also be accessed directly at www.gaf.com/architects-specifiers. The new portal offers a clean look with minimal clutter to make it easier to find the technical information and product data that architects need.

This specially designed portal is user-friendly for the technical professional. It now offers architects and specifiers fast retrieval of pertinent information like data sheets, specs, code information, and application instructions without the usual “selling content” found on general information websites. The new design utilizes drop-down menus that will greatly improve search functionality along with tabs dedicated to residential and commercial products. The portal also offers links to current press releases, contractor and distributor locators, GAF sustainability program details, CARE education and training opportunities, as well as direct contact information for GAF services that the architect/specifier may require.

“This improvement will make our industry-leading GAF website even better. Our new portal design is based on customer feedback that indicates design professionals want access to answers and technical information as fast as possible with clear, easy to use web pages,” stated Doug Beck, Executive Director Marketing at GAF. He added, “GAF strives to continually improve and focus on customer needs.”

To learn more about GAF roofing products, visit www.gaf.com.

About GAF
Founded in 1886, GAF has become the largest roofing manufacturer in North America. The company’s products include a comprehensive portfolio of steep-slope and commercial roofing systems, which are supported by an extensive national network of factory-certified contractors. Its success is driven by its commitment to Advanced Quality, Industry Expertise, and Solutions Made Simple for contractors, specifiers, and property owners alike. In 2011, GAF was the first roofing manufacturer to offer a Lifetime limited warranty on all of its laminated shingles and, in 2012, it introduced the GAF Lifetime Roofing System.

With a focus on social responsibility, GAF has developed Advanced Protection® Shingle Technology, which provides superior durability and wind resistance while reducing the use of scarce natural resources. The company has also developed single-ply and asphaltic membranes with superior durability and high reflectivity to meet the most rigorous industry standards while helping commercial property owners and designers reduce energy consumption.

GAF also supports the roofing industry through CARE, the Center for the Advancement of Roofing Excellence, which has provided education to over 125,000 professionals. CARE’s mission is to help professional contractors and distributors build their businesses through sales and management education, and to provide product and installation training to contractors, distributors, architects, property owners, and related industry personnel. For more information about GAF, visit www.gaf.com.

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Construction Employment Hits Two-Year High In January But Industry's 17.7 Percent Unemployment Rate Remains Double Overall Rate
Mild Weather Means Some Gains May Be Temporary, Construction Economist Cautions; Association Officials Urge Lawmakers to Complete Bills to Fund Infrastructure, Support Private Investment

The construction industry added 21,000 jobs in January, as a second consecutive month of unseasonably mild winter weather helped the industry raise employment to a two-year high, according to an analysis of new federal employment data released today by the Associated General Contractors of America. Association officials cautioned that the gains remain fragile amid declining public sector investments in construction and infrastructure.

"Although it's great news that the industry has added 52,000 jobs in the past two months, the unemployment rate in construction is still double that of the overall economy, and construction employment remains at 1996 levels," said Ken Simonson, the association's chief economist. "It will take another month or two to see if the recent job growth reflects a sustained pickup or merely acceleration of homebuilding and highway projects that normally halt when the ground freezes in December and January."

Total construction employment now stands at 5,572,000, or 0.4 percent higher than a month earlier, and 116,000 (21 percent) higher than in January 2011 – which was an exceptionally cold and snowy month in many regions, the economist said. He added that construction employment is still 28 percent below its peak level of 7,726,000 in April 2006 and is no higher than in August 1996.

The industry's unemployment rate in January was 17.7 percent, not seasonally adjusted, Simonson noted. The rate was down from 22.5 percent a year earlier but still double the all-industry rate of 8.8 percent (8.5 percent, seasonally adjusted).

Job gains occurred at similar rates across the major construction segments in the past year, Simonson commented. Heavy and civil engineering construction employment grew by 2.6 percent or 21,000 jobs from January 2011 to last month. Nonresidential building and specialty trade contractors increased their combined employment by 2.0 percent (17,000 jobs), while employment among residential building and specialty trade contractors rose by 2.1 percent (41,000 jobs), he said.

Association officials said the across-the-board increase in construction jobs was heartening, but they were concerned that failure to enact highway and other infrastructure funding in Washington would drag down employment, especially in heavy and civil engineering construction.

"While it is encouraging to see some recent progress on aviation and surface transportation measures, it is vital that Congress and the White House make passing key infrastructure and pro-growth measures a top priority," said Stephen E. Sandherr, the association's chief executive officer. "Without adequate long-term funding for infrastructure, competitive tax rates and fewer costly regulatory hurdles, the construction industry may lose many of the jobs it has gained in the past year."

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148 Out Of 337 Metro Areas Add Construction Jobs Between December 2010 & 2011 As Spending On Construction Increases By 4.3 Percent Year Over Year
Lake County-Kenosha County, Ill.-Wis. and Edison-New Brunswick, N.J., Top List of Metro Areas Adding Jobs; Philadelphia Lost the Most, While Logan, Utah-Idaho Had Largest Percentage Decline

Construction employment increased in 148 out of 337 metropolitan areas between December 2010 and December 2011, decreased in 128 and stayed level in 61, according to a new analysis of federal employment data released today by the Associated General Contractors of America. The construction employment increases were likely fueled by a 4.3 percent increase in total construction spending between December 2010 and December 2011, driven largely by growing private sector demand, association officials noted.

“Many communities are benefitting from growing demand from the private sector for new construction activity,” said Ken Simonson, the association’s chief economist. “Unfortunately, too many other areas are still coping with construction employment losses as the overall market remains relatively weak.”

Lake County-Kenosha County, Ill.-Wis., added both the most and the highest percentage of new construction jobs (33 percent, 3,900 jobs). Other areas adding a large number of jobs included Edison-New Brunswick, N.J. (3,700 jobs, 11 percent); Portland-Vancouver-Hillsboro, Ore.-Wash. (3,600 jobs, 8 percent); Louisville-Jefferson County, Ky.-Ind. (3,100 jobs, 13 percent) and San Jose-Sunnyvale-Santa Clara, Calif. (3,100 jobs, 10 percent).

The largest job losses were in Philadelphia, Pa. (-4,800 jobs, -7 percent), followed by New York City (-4,600 jobs, -4 percent); Dallas-Plano-Irving, Texas (-4,500 jobs, -4 percent) and St. Louis, Mo.-Ill. (-4,300 jobs, -7 percent). The Logan, Utah-Idaho area (-23 percent, -700 jobs) lost the highest percentage. Other areas experiencing large percentage declines in construction employment included Wilmington, N.C. (-20 percent, -1,800 jobs); Montgomery, Ala. (-17 percent, -1,100 jobs) and Bridgeport-Stamford-Norwalk, Conn. (-14 percent, -1,500 jobs).

Simonson noted that total annualized construction spending rate increased from $782.9 billion in December 2010 to $816.4 billion in December 2011, a 4.3 percent annual increase and a 1.5 percent jump from November 2011. However, for the full year, construction spending fell 2 percent from the 2010 total. The increases were largely driven by growth in private sector demand, the economist said, noting that spending on private nonresidential construction activity increased by 2.4 percent compared to 2010, while residential construction slipped 1.1 percent and public construction declined 6.5 percent.

Association officials said that recent developments in Washington that could lead to passage of long-delayed highway, bridge, transit and aviation investment legislation could give a needed boost to construction employment in many areas. They added that they would continue pushing Congress to act on the measures as part of the group's "Make Transportation Job #1" campaign.

“Construction employment should increase once Congress finally acts on long-overdue infrastructure measures,” said the association’s chief executive officer, Stephen E. Sandherr. “After all Washington should be taking measures to help this industry recover, instead of holding it back.”

View construction employment figures by state and rank.

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New Size Standards from SBA Reflect Concerns Expressed by Architects
Threshold Reduced from $19 to $7 million After Thousands Oppose Proposed Rule

The Small Business Administration (SBA) announced today it will abandon plans to increase by 400 percent the size standard for architects eligible for SBA set-asides. The decision reflects the concerns expressed in the more than 1,200 comments received by the agency during the comment period on the original SBA proposal.

The AIA filed comments in June strenuously opposing the SBA’s original proposal to raise the size standard to $19 million from $4.5 million in gross annual receipts for architects to qualify as a small business. This regulation is crucial for firms which do federal work as $190 billion of the $700 billion in contracts goes to firms that qualify as small businesses.

“We appreciate the SBA listening to the small business community’s opposition to its original proposal, which would have hurt many of the AIA’s small business members,” said AIA President Jeff Potter, FAIA. “With the SBA’s announcement today, we now have a size standard that better reflects the reality of the profession.”

The SBA received more than 1,200 comments on its original proposal. Over 90 percent of those comments rejected the $19 million cap for architects originally proposed by the agency.

“I’m so proud of our members for standing up and letting our collective voices be known on an issue of major importance to our profession,” added Potter. “And while the decision doesn’t solve the entire size standard issue, we look forward to working with the SBA and Capitol Hill in continuing to make our profession’s views known on other small business concerns.”

The SBA’s original proposal would have been devastating to many small firms and sole practitioners because it would have lumped architecture, engineering, interior design, landscape architecture and mapping into the same $19 million bucket. The SBA’s proposal would have let large architectural firms with a variety of disciplines qualify for small business benefits, at a time when such aggregated firms do not represent the current demographic for architecture firms, 80 percent of which have 10 or fewer employees.

About The American Institute of Architects
For over 150 years, members of the American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. Members adhere to a code of ethics and professional conduct to ensure the highest standards in professional practice. Embracing their responsibility to serve society, AIA members engage civic and government leaders and the public in helping find needed solutions to pressing issues facing our communities, institutions, nation and world. Visit www.aia.org.

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American Institute of Architects Issues Statement on Transportation Bills in Both House and Senate

The American Institute of Architects (AIA) today issued the following statement in response to the transportation re-authorization bills making their way through both the House and the Senate.

The statement should be attributed to AIA President Jeff Potter, FAIA:

“While we are gratified that both the House and the Senate are moving ahead on transportation bills, there are some provisions that would take our communities in the wrong direction,” said Potter.

From the AIA’s perspective, here is a detailed look what’s good and what’s problematic in bills in transportation bills making their way through both the House and the Senate:

◦The AIA commends the Senate Banking Committee for approving on a unanimous bipartisan vote provisions that would help communities plan for mixed-use development around transit. This was a major finding of the AIA’s 2008 study, “Moving Communities Forward,” which found that communities that had inclusive planning processes that addressed transportation, sustainability and economic developing holistically ended up with more successful projects.
◦While legislation in the House also provides some support for such development, the AIA is concerned that provisions in bills that have passed House committees would hurt a community’s ability to plan. This is especially true for provisions in the Ways and Means bill that remove transit from the trust fund and provisions in the Transportation and Infrastructure committee’s bill that prevent communities from using funds for preservation and re-use of historic facilities.
◦Indeed, the recent AIA Home Trends survey shows that better planning is exactly what voters want. It found that “in recent years, there has been a definitive shift away from large residential subdivisions towards smaller scale infill development projects with a greater emphasis on affordability, access to public transportation, commercial opportunities and job centers.”
“At a time when communities are struggling to get back on their feet, the ability to plan around transit, revitalize existing facilities, and coordinate infrastructure planning with struggling municipalities is the most effective recipe for economic recovery,” Potter said. “We urge Congress to continue working on a truly bipartisan bill that helps meet the design and construction industry goals: hold funding levels steady, support multiple modes of transportation, and account for the many enhancements that well-planned transportation projects can bring to communities throughout this great nation.”

About The American Institute of Architects
For over 150 years, members of the American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. Members adhere to a code of ethics and professional conduct to ensure the highest standards in professional practice. Embracing their responsibility to serve society, AIA members engage civic and government leaders and the public in helping find needed solutions to pressing issues facing our communities, institutions, nation and world. Visit www.aia.org.

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Construction Employment Rises In 28 States And D.C. In December, While 21 States Shed Industry Workers During The Past 12 Months

Construction employment rose in 28 states and the District of Columbia between December 2010 and December 2011, the largest number of states with year-over-year employment gains since November 2007, according to an analysis by the Associated General Contractors of America of Labor Department data. In contrast, 24 states plus D.C. lost jobs between November and December 2011, while 23 states added construction jobs for the month.

"It is encouraging that a clear majority of states added jobs during 2011, but it is too early to conclude that the industry is on a steady upswing," said Ken Simonson, the association's chief economist. "Public construction is likely to shrink in 2012 and there are many uncertainties about home building, office and retail construction."

Seasonally adjusted construction employment climbed from November to December in 22 states. New Hampshire had the largest one-month percentage gain (4.9 percent, 1,000 jobs), while California added the largest number of construction jobs for the month (4,800 jobs, 0.8 percent). Vermont had the second largest one-month percent gain (4.7 percent, 600 jobs). Indiana added the second largest number of jobs for the month (3,600 jobs, 2.9 percent increase).

Of the 25 states plus D.C. that lost construction jobs from November to December, West Virginia had the largest one-month percentage drop (-4.7 percent, -1,600 jobs), with New York next (-3.6 percent, -11,400 jobs), followed by Nevada (-3.5percent, -2,000 jobs) with Wyoming (-3.0 percent, -700 jobs) and Rhode Island (-3.0 percent, 500 jobs) tied. New York lost the largest number of construction jobs for the month (-11,400 jobs, -3.6 percent), followed by Illinois (-4,300 jobs, -2.2 percent), then Louisiana (-2,800 jobs, -2.8 percent). Maine, Connecticut, and Mississippi had no change in monthly construction employment.

North Dakota ranked first among 28 states and the District of Columbia that recorded construction employment gains from December 2010 to December 2011. The state added 24 percent (5,100 jobs). Indiana ranked second (12.1 percent, 13,600 jobs), followed by West Virginia (10.2 percent, 3,000 jobs) and Tennessee (6.7 percent, 7,200 jobs). California added the largest number of jobs (21,300, 3.9 percent), followed by Indiana (13,600, 12.1 percent).

Among the 21 states that lost construction jobs over the past 12 months, New Mexico experienced the steepest decline (-13.7 percent, -6,000 jobs), followed by Delaware (-5.6 percent, -1,100 jobs), Georgia (-4.6 percent, -6,400 jobs) and Alabama (-4.4 percent, -3,700 jobs). Georgia shed the largest number of jobs over the year (-6,400 jobs, 4.6 percent) with Texas (-6,300 jobs, -1.1 percent) losing the second-highest number of jobs; New Mexico was third-worst (-6,000 jobs, -13.7 percent). North Carolina had no change in construction employment over the year.

Association officials said the new state employment figures are consistent with the results of their recently released Construction Hiring and Business Outlook. While more contractors report plans to hire than layoff in 2012, the overall outlook was mixed as contractors expressed concern about funding for a host of publicly funded market segments.

"Short term, and shortsighted, cuts in construction investments could undermine chances for a construction industry recovery in 2012," said Stephen E. Sandherr, the association's chief executive officer. "It is essential that Congress follow through on reported agreements that may finally allow for enactment of long-overdue aviation and surface transportation legislation."

View the state employment data by rank and by state.

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Construction Firms To Make Significantly Fewer Layoffs In 2012 As Private Sector Demand Improves, Despite Mixed Overall Industry Outlook

Significantly fewer construction firms are planning to make layoffs in 2012 than at any point in the past few years according to survey results released today by the Associated General Contractors of America and Computer Guidance Corporation. The survey, conducted as part of the 2012 Construction Industry Hiring and Business Outlook, shows many firms expect key private sector market segments to expand this year even as the overall outlook remains mixed.

“While there are some promising signs, especially when it comes to construction employment, the outlook for the industry is mixed,” said Stephen E. Sandherr, the association's chief executive officer. “More than four years after demand for commercial construction began to plummet, economic conditions remain difficult.”

Sandherr noted that far fewer firms are planning on making layoffs this year, only 9 percent in 2012 compared with 37 percent last year and 55 percent in 2010. He added that 32 percent of firms report they plan to add new staff in 2012. Even more positive, half of those firms report plans to add 6 or more new employees during the next 12 months.

Among the 29 states with large enough survey sample sizes, 57 percent of firms in Wisconsin plan to hire new staff this year, more than in any other state. Only 16 percent of firms in Virginia plan to add staff this year, the least amount in any state. Meanwhile, 18 percent of firms in Missouri plan layoffs for this year, the highest percentage of any state. No firms working in South Carolina reported plans to make layoffs this year. (Click here for state-by-state survey results.)

A majority of firms expect the dollar volume of projects they compete for to either grow or remain stable in every market segment. In particular, roughly three-fourths of contractors expect the power and the hospital and higher education markets to expand or remain stable this year. In contrast, contractors working on a number of market segments typically funded by the public sector are more pessimistic. Forty-four percent of contractors expect the market for new public buildings to shrink, 41 percent expect the market for K-12 school construction to shrink and 40 percent expect the highway market to contract.

In addition, many contractors report they continue to be impacted by tight credit conditions. Nearly half – 49 percent – of responding firms report that tighter lending conditions have forced their customers to delay or cancel construction projects. Perhaps related to the tough credit environment, 60 percent of firms expect demand for green construction projects to either stagnate or decline in 2012.

“There are definitely some conflicting trends when it comes to contractors’ expectations for 2012,” said Ken Simonson, the association's chief economist. “The construction industry will improve this year but we are going to have to wait until at least 2013 before contractors experience the kind of recovery this industry needs.”

Simonson added that contractors appear cautious with their plans for acquiring new construction equipment. Many more firms report plans to lease, instead of purchase, new equipment. Only 40 percent of firms report they plan to buy new equipment this year, while 66 percent plan to lease. Even as they shift toward more leasing, firms’ appetite for new equipment remains modest, with 57 percent saying they will buy $250,000 or less in equipment and 70 percent saying they will lease $250,000 or less worth of equipment this year.

Contractors also report being caught between stagnant bid levels and rising materials prices. Eighty-six percent of firms report they expect their materials prices to increase in 2012, even as 80 percent say they expect bid levels to stagnate or decline this year. Adding to the cost squeeze, 81 percent reported their health care costs went up in 2011 and 82 percent expect their health care costs to increase in 2012.

A growing number of firms appear to be focused on increasing efficiency and reducing costs by taking advantage of Building Information Modeling services, also known as BIM, association officials noted. Thirty-one percent of firms report they currently use the technology, up from just 8 percent from last year. And 47 percent report they expect the use of BIM to increase in 2012.

“As a result of the tight market conditions, firms are trying to find the best way to leverage their investments in new information technology,” said Roger Kirk, Computer Guidance’s president and CEO. “Contractors are looking for software and technology that increases the efficiency of existing staff and allows firms to do more with fewer people.”

Kirk noted that 55 percent of firms report they plan to invest in their information technology departments in 2012. He added, however, that companies looking to invest in replacing older software are looking at ways to avoid large-scale up front investments. For example, while only 9 percent of firms reported plans to purchase new software, one-third of firms report they would consider leasing or financing new software. Interest in Cloud-based computing appears to be growing among construction firms, Kirk noted.

The outlook, which the association co-sponsored with Computer Guidance, was based on survey results from over 1,300 construction firms from 50 states, the District of Columbia and Puerto Rico. Contractors from every segment of the industry answered over 30 questions about their hiring, equipment purchasing and business plans. Economists and specialists from the association and Computer Guidance analyzed those comments to craft the outlook.

Click here for the 2012 Construction Hiring and Business Outlook report. Click here for the survey results.

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FMI Releases 2012 Construction Productivity Report

FMI, the largest provider of management consulting and investment banking to the engineering and construction industry, releases today its newest survey “The 2012 U.S. Construction Industry FMI Productivity Report.”

The early effect of the recession on the nonresidential construction sector included significant productivity improvement. Downsizing has resulted in retaining the most experienced and best-trained personnel who are the most capable of working more efficiently and harder. However, this initial productivity spike has begun to wear off over time. While productivity does continue to improve, the rate of improvement is slowing.

More than half of the survey respondents did report improvement. However, for the majority it is only a slight change. Interestingly, 80 percent of respondents believe they can save at least five percent of their annual field labor cost through better management. These results are similar to a 2008 study conducted by FMI.

To that end, one of the largest areas for improvement is planning at the field manager level. Seventy percent of survey respondents experiencing improved productivity plan field resources at least five days in advance. Only 40 percent of those who said productivity has decreased plan that far ahead.

Another bright spot is the increasing use of new technologies like building information modeling and lean construction practices. Forty-two percent of respondents who have used prefabrication on projects have experienced improved productivity by 10 percent or more. Additionally, although only 35 percent of all respondents have employed integrated project delivery, 19 percent of them are reporting significant improvements in productivity.

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.

About FMI:
FMI is the largest provider of management consulting, investment banking and research to the engineering and construction industry. We work in all segments of the industry providing clients with value-added business solutions, including:
  • Strategy Development
  • Market Research and Business Development
  • Leadership and Talent Development
  • Project and Process Improvement
  • Mergers, Acquisitions and Financial Consulting
  • Compensation Data and Consulting

Founded by Dr. Emol A. Fails in 1953, FMI has professionals in offices across the U.S. FMI delivers innovative, customized solutions to contractors; construction materials producers; manufacturers and suppliers of building materials and equipment; owners and developers; engineers and architects; utilities; and construction industry trade associations. FMI is an advisor you can count on to build and maintain a successful business, from your leadership to your site managers. For more information, visit www.fminet.com.

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