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.