Construction Starts Data and Building in a Down Economy
The smart and data-friendly folks at DQYDJ.net and I have collaborated on an article over at their site! That article considers construction spending as a percentage of GDP, and whether that metric means anything at all. It’s an interesting read, so go check it out. In the meantime, I am very interested in understanding the construction industry (since I work in it) and what economic trends change for builders. Residential construction is looking up, with a notable increase from 2011 in both permits and actual starts. But commercial and public construction projects are also worth considering, since those projects are often in our backyards, from transportation (light rail, airports), new schools, commercial centers and public infrastructure that needs regular maintenance and updating. The activity in the public and commercial sector has increased since 2009, but contractors are still not rosy in their outlook. Competition is fierce for each new project, with large numbers of contractors bidding on jobs. Contractors are well aware of this situation, but for the first time, I heard a public official of a very large LA public agency comment on the situation at a recent construction event. He acknowledged that while their organization had had a great few years in terms of building, it had been at the expense of contractors who had sometimes underbid so severely that they hadn’t been able to finish the project. All of us in the contracting community already knew all that, but I was amazed to hear a public official address the situation so frankly and openly. Even though I’ve often been dismissive of government agencies and assumed all of them to be slow, top-heavy and process-oriented versus results-oriented, this frank discussion of the main concern for contractors was exciting and groundbreaking. If key players on both sides can talk about how we can achieve great building results with reasonable margins for contractors, then progress for both sides is possible, not just major profits for contractors at the expense of public agencies or excellent savings for agencies at the expense of contractor livelihood.
It was fun! However, due to the amount of data in the article, I’m predicting that traffic will be high and comments will be moderate.
I’m going to try to dig into the numbers for the US more at some point – maybe it will be useful for you and the contractors? I think I can find something with a bit more resolution (trying to do that for China or Japan would be impossible, haha).
That works for me! Although it will be interesting to see if people have follow-up questions. I’m interested in seeing what the digging into the US data would entail, keep me in the loop! Thanks again PK!
Cool! Have you heard of SmartBrief? They summarize top headliners relating to your field of interest. Here’s one for construction: http://www.smartbrief.com/news/agc. I use it for ASCE and it’s great! =)
Interesting. I’m always wondering why some contractors bid so low to get a job that they just can’t make any money and stay in business. It seems like they’d do a better job learning how to calculate a reasonable profit margin.
Cash flow is contracting’s biggest strategic problem. Consider that many commercial/public clients will not pay until 30 days after the monthly invoice is submitted and the prime can take another 10 to 30 days to pay subs…it can get very difficult even when you have plenty of work.
Great job on the post, guys! I really think we’re headed into a slow upswing on housing starts given that rents are only increasing while housing prices continue to drop/flatten in some key markets.
One of these days we might be out of this economic hell hole. One of these days…
[...] My Retirement Budget at Step Away From The Mall Construction Starts Data and Building in a Down Economy at American Debt Project 4 Ways To Build an Emergency Fund Faster at Work Save Live Vehicle [...]