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Sunday, 04 August 2013 22:00

Michigan construction and design industry markers dip in recent reports

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It’s a good time to be an architect — except in the Midwest.

That’s according to the most recent American Institute of Architects Billings Index, which shows billing in the Midwest is stalled a couple points behind the measure of industry growth at 48.3, meaning that architects see contraction in the sector. The reading is nearly on par with the level of 48.0 from June of last year. Any number above 50 indicates industry expansion.

The Midwest was the only region of the country to reflect a negative movement for billings.

Local industry professionals MiBiz spoke with said while the Midwest market might be down in reported billings, activity and market conditions suggest the West Michigan region should see more requests for design services through the summer and into the fall.

With commercial real estate brokers in the industrial sector reporting the market is tightening past 90 percent occupancy — along with a bump in retail development and leasing — more build-outs are expected in the major commercial corridors.

Even though the index for the Midwest remains low, it actually ticked up compared to the 47.5 reading in April, the trough of a slide that started in January.

Nationally, the Billings Index was 51.6, still positive but a slight decline from 52.9 in April and well above the reading of 47.3 a year ago.

Overall the index shows the need for design services is growing nationally, which is a rebound from less-than-positive numbers in April and a slight tapering after a three-month high in May.

In the Consensus Construction Forecast Panel report released in late July, AIA Chief Economist Kermit Baker said the construction industry got off to a slow start in 2013, and while the second half of the year is expected to see improvement, firms have ratcheted back their projections for growth.

Firms expect business to increase just 2.3 percent for the year as a whole, down from a forecast of 7.2 percent growth from December 2012.

Driving the less optimistic forecast are declines in key building types, including manufacturing (7.4 percent), offices (4.7 percent), amusement and recreation (3.9 percent) and education (3.4 percent). Meanwhile, the retail, health care and religious sectors have all remained flat, Baker reported.

“Overall, the year is shaping up as a bit of a pause in the broader pattern of the construction recovery,” he stated in the report. “Next year is expected to produce another acceleration in spending growth, with construction spending gains in excess of 7 percent.”

Baker sees the commercial and industrial construction sector growing about 8 percent this year with “low double-digit range” growth in 2014. The office and retail segments should have “strong, but less robust growth.”

While spending on new manufacturing facilities spiked almost 20 percent last year, Baker forecasts “much more modest gains” this year and next.

The other bright spot on the horizon: Spending on health care facilities is expected to continue to rise as organizations work to comply with the Affordable Care Act, he added.

Despite a slow start to the year, construction employment actually increased nationwide, dropping the industry’s unemployment rate to 9.8 percent in June, according to a July 5 report from the Association of General Contractors of America (ACG).

In Michigan, construction employment declined 0.9 percent in June to 124,900, down some 1,100 jobs from the previous month and down 1.7 percent or 2,100 jobs from a year ago, according to AGC data.

The construction industry in Michigan was ranked as the eighth worst in the country based on the percentage decline in employment over the last 12 months, according to the ACG.
The state’s construction employment is down 42 percent or 89,300 jobs, from its peak in April 2000.

While unemployment is down nationwide, a shortage of workers could back up project timelines as firms look to fill crews and meet client demands, according to reports.

MiBiz reported in April that a rebound in building work on behalf of the education, health care and multi-family markets had West Michigan general contractors tapping a shallow pool of subcontractors. At the same time, those same subcontractors were carefully managing workloads to avoid getting overextended.

Firm headcounts increased by 3.4 percent nationally and hours worked rose by 4.7 percent over the last 12 months, the AGC report stated.

Association officials warn worker shortages could spread without vocational education and immigration reforms.

“Construction employment in June was the highest since August 2009,” Ken Simonson, AGC’s chief economist, said in a statement. “But employment is still down by one-quarter from the peak more than seven years ago. Many of those laid-off workers have left the industry — whether for employment elsewhere, more education or retirement — and construction companies face a looming worker shortage.”

MiBiz Managing Editor Joe Boomgaard contributed to this report.

Read 3474 times Last modified on Sunday, 04 August 2013 13:58
Elijah Brumback

Staff Writer

[email protected]mibiz.com