February 4, 2013

AGC: Puget Sound top market for contractors

Simonson

Last year was a mixed bag for national construction employment: 24 states added workers, 24 shed them and two had no change — but Washington state posted strong results.

According to data from the Associated General Contractors of America, Washington ranked third in construction jobs added over the year, with 9,000 people finding work. It also was tied for fourth in the percentage of new jobs added, at 6.5 percent.

AGC chief economist Ken Simonson was in town recently to talk to the local chapter. He talked with the DJC about how things look for this area as well as the overall economy.

“If I were a contractor looking at where in this country to open up operations, I would look at Puget Sound,” he said.

Big projects such as the Alaskan Way Viaduct replacement, new state Route 520 floating bridge and Amazon.com expansion are creating jobs here.

Simonson said Washington is more open to public-private projects, a model popular in Europe and Canada, than most other states. That could bode well for partnerships to build projects here such as college dorms and parking garages, since there is a lot of interest from public universities, he said.

Simonson said the recession hurt small colleges more than large universities. Both had fewer funds due to diminished taxes, but many universities sought private donations for capital projects.

The K-12 market is suffering the same affliction as small colleges, and it will be two years before tax revenues rebound, he said.

Simonson said the national outlook for office and retail is bearish, with a few exceptions in the office sector including Seattle, San Francisco, Silicon Valley and New York City.

Locally, the office market is being pumped up by Amazon's expansion in South Lake Union.

Simonson said U.S. companies that lost workers in the recession are adding them back, but occupying smaller spaces. Some are staggering shifts so that employees can share desks, and others are eliminating computer server rooms by using cloud-based services.

There's also a trend toward renovating space instead of building new offices.

Simonson said new mixed-use buildings and renovations are keeping retail from being a disaster, but there are still no shopping centers or big-box stores being built.

The shift to online sales has boosted demand for warehouses to speed delivery of those purchases. Amazon on Wednesday announced that it is building three fulfillment centers in Texas that are about 1 million square feet apiece.

In housing, Simonson said multifamily had a nice jump in 2012 and single-family made a comeback later in the year. Both markets will have steady growth this year, but single-family may level off in the second half.

Strength in multifamily comes from younger workers who want to live downtown and forego car ownership, he said. There also are more people retiring and not buying houses.

A lot of suburban houses coming on the market will also hold down prices, and that will reinforce the notion that homeownership is not a great investment, according to Simonson.

Private construction outside of the residential segment benefited from a year of “shale gale,” where a jump in oil and gas production in certain states increased demand for roads, housing and services, he said. The newly tapped natural resources have also boosted demand for piping, sand, steel mills and export terminals.

Simonson said demand for exported compressed natural gas could really jump if Japan cuts back on nuclear energy.

Prices for construction materials — especially steel, copper and diesel — are expected to rise a modest 1.3 percent this year due to subdued growth in China and soft European markets, he said.

Prices for wallboard, OSB and plywood may jump a little more due to increased demand.

Locally, demand for concrete should be strong because of the floating bridge's 77 pontoons and other big projects, he said.

Simonson said it may get difficult to find construction workers as the economy improves. Certain crafts, such as pipefitters, have left for the oil patch states.

“A lot of people that were working in construction have left the field (altogether),” he said, and a lot of universities are seeing fewer students in their construction programs.