In what is surely good news for both contracting firms and those working construction jobs in the densely populated New York City metropolitan area, the value of contracts for future construction projects in the area went up 25 percent year over year. The increase was the same for both residential building deals as well as commercial and industrial construction, showing a steady growth for all types of development. Long Island-based newspaper Newsday highlighted figures from McGraw-Hill Construction showing that the value of all such contracts signed in May 2014 was approximately $1.9 billion, up about $469 million from one year ago.
Despite the recent positive developments in both the residential and commercial construction markets, there's one area where construction projects still haven't truly begun to rebound to pre-Great Recession levels: public jobs funded by various levels of government. While local, state and federal authorities are all still funding infrastructure improvements and building new structures, the overall amount of building simply hasn't recovered. Projects are often addressed only when they become dire needs, and less proactive construction, such as road improvements, is occurring. However, Business Insider reported some interesting statistics that may indicate an upward surge in this part of the construction market. Namely, dealers of Caterpillar equipment believe the market for government construction has hit its bottom and will soon rebound.
The Chicago Transit Authority recently announced planned improvements to the Blue Line are going to start sooner than expected. The nearly $500 million rehab project was originally planned to start in late spring, but now, the CTA is making arrangements to get going on it sometime in March. Officials said the first step entails replacing antiquated wooden rail ties, tie plates and other parts of the elevated tracks between the Damen and Logan Square stops. The weekend of March 21-24 is when the first temporary closures are tentatively projected to take place.
Your New Blue is Largest Line Investment in 30 Years
Some of the stations being upgraded in the $492 million project were built in 1895. Not only are these improvements needed, but they will also give Chicagoans access to railways with improved lighting, cleaner tunnels and drier platforms. Optimizing the 12.5-mile stretch is expected to take 10 minutes off of trips from O'Hare International Airport to downtown and vice versa.
Mayor Rahm Emanuel and Ill. Governor Pat Quinn believe the Your New Blue plan will give the 25 million yearly riders of the line an improved experience and shows the government officials are dedicated to giving Chicago commuters and visitors a better railway to get to O'Hare airport and travel into the city. Below are some of the major components of the plan, according to the CTA:
- Renovations to the Grand, Chicago, Division, Damen, California, Logan Square and Jefferson Park stations
- Repairing areas known as "slow zones" at Milwaukee Subway (Damen to Belmont) and Dearborn Subway (Grand to Division)
- Customized improvements near O'Hare and Rosemont to cut down on delays and allow for more efficient travel
- Installing a new wireless infrastructure in subways tunnels to give commuters better access to voice, data and Web service
- New water management systems to reduce drainage problems at certain stops
"Your New Blue represents a huge investment in CTA riders and visitors traveling to Chicago via O'Hare and the many vibrant communities along the North and Northwest Sides," said CTA President Forrest Claypool. "These long-overdue improvements are part of Mayor Emanuel's efforts to modernize our transit system for the 21st century."
Governor Quinn Believes Project Creates Local Jobs
The repairs are expected to create many construction jobs in Chicago, and 1,300 total employment opportunities. While F. H. Paschen, S.N. Nielsen and Associates was the contractor awarded the job at the Damen, Western and California stations, the CTA is looking for companies to complete the rest of the project, which will take place between the Grand and O'Hare stations. Local construction firms will be selected by the CTA as the company completes the schedule for the upcoming repairs.
"Strategic investments to build [a] 21st century transportation system throughout Illinois are a key part of my jobs agenda," Governor Quinn said. "By modernizing the Blue Line, we are creating more than 1,000 jobs while making it faster, safer and more reliable for the millions of travelers that use it every year."
It's easy to dismiss the most recent figures from the U.S. Department of Commerce about home construction numbers as negative. After all, a 6.5 percent drop in overall starts is clearly a reduction from April, when construction started on 1.07 million new homes. Newsday pointed out the drop equates to 60,000 fewer homes being built, and fewer projects mean fewer construction jobs. However, viewing the numbers from a pure volume of construction starts means missing a fact highlighted by MarketWatch: The number of permits issued to begin construction rose significantly in May, gaining 3.7 percent from April. Additionally, the confidence interval for that 6.5 percent reduction was 10.2 percent, which is the statistically precise way of saying the Department of Commerce isn't entirely sure if construction numbers actually decreased or not.
MarketWatch provided the reminder that a single month of increases in permitting doesn't mark a trend, but the marked jump as the seasons change and weather improves across the country is likely good news for contractors. More construction projects of all kinds take place across the country during the warmer seasons, as crews aim to take advantage of longer daylight hours and more hospitable temperatures. Because many contractors, especially those in colder climates, rely on increased workloads in the summer, the uptick in overall home construction is a good sign overall.
Home Construction Slowly Recovering
Although there are still hurdles to overcome until the construction industry reaches pre-Great Recession levels of overall productivity, the trend of slowly growing home construction rates are a positive. In a recent economic forecast from MarketWatch, homebuilder confidence showed a five-month high that indicates both a recovery from the seasonal swing of construction and other factors. The index, put together by the National Association of Home Builders and Wells Fargo, currently sits at 49 points. This means the industry is almost evenly divided on whether they have a positive outlook for future construction in the short term.
Because economic recovery has generally been slow, many contractors are hedging their bets by slowly and cautiously adding inventory and employing additional workers. This slow return to normalcy from the depths of the Great Recession is less than ideal, but it indicates positive, although slow, growth in the home construction industry. While many builders would rather have already experienced a complete righting of the economic ship, the generally positive growth in home construction numbers is a good outlook for the future.
The demand for multifamily homes continues to be on the rise in the United States. At the National Association of Home Builders International Builders' Show in Las Vegas, panelists said the construction of such projects is expected to continue increasing in 2015 or 2016. David Crowe, chief economist at the NAHB, believes that three primary drivers are behind the strong performance of multifamily homes:
- The economic collapse caused the construction of multifamily homes to greatly decrease and recent growth is the result of the market playing catch-up.
- There is strong demand from baby boomers and millennials for housing in multifamily homes.
- People are more willing to rent than buy because of strict underwriting standards for mortgages, decreased credit scores and lower entry-level salaries.
To complete all projects expected for the upcoming year, construction firms may need to hire electricians, subcontractors and other specialists. With the number of new construction jobs continuing to grow in 2014, the rise of multifamily homes will likely lead to more hiring in the industry.
"The multifamily market has come a long way since the collapse," said Guy Hays, president of Legacy Partners Residential Inc. in Foster City, Calif., and a panelist at the NAHB IBS conference. "Overall, supply and demand are in balance, and in most markets there is a need for the continued production of new units."
Baby Boomers See Potential in Multifamily Homes
Crowe stated that multifamily housing starts have grown from 82,000 in 2009 to 340,000 in 2013, citing data from the government. An article for The Wall Street Journal reaffirms the NAHB's statements that construction for such housing is expected to pick up in 2014 and 2015, due to the economic climate continuing to change. Jordan Rappaport, senior economist for the Federal Reserve Bank of Kansas City, is confident in the future of multifamily homes, according to the newspaper.
"The longer-term outlook is especially positive for multifamily construction, reflecting the aging of the baby boomers and an associated shift in demand from single-family to multifamily housing," he wrote in a recent issue of the bank's Economic Review. "By the end of the decade, multifamily construction is likely to peak at a level nearly two-thirds higher than its highest annual level during the 1990s and 2000s."
Demand for Multifamily Homes Could Shift the Economy
Rappaport believes that the growing interest in multifamily homes, not just among boomers and millennials, but across the country as a whole, can have a major impact on the economy. He wrote that the prices for single-family homes could fall in response, consumer goods and services related to single-family homes could become less popular and communities could change local zoning codes to accommodate multifamily homes.
"It will put downward pressure on single-family relative to multifamily house prices," he wrote. "It will shift consumer demand away from goods and services that complement large indoor space and a backyard toward goods and services more oriented toward living in an apartment."