Construction Market Outlook Optimistic for 2013, AGC Reports

Respondents to a recent survey conducted by the Associated General Contractors of America (AGC) were positive about the outlook for the construction market in 2013, citing increased demand for private construction projects, along with growth in the construction of both hospitals and higher-education facilities. AGC released the results of the survey, conducted as part of the association’s “Tentative Signs of a Recovery: The 2013 Construction Industry Hiring and Business Outlook,” during a webinar earlier this week.

Stephen Sandherr, AGC CEO, began the discussion with a look at what occurred in 2012.

“Construction was actually stable in 2012,” he said. “Construction investments rose by about 7 percent last year, driven mostly by increases in private sector demand. Construction employment only increased by 18,000 nationwide.

“The question we want to answer from this year’s outlook is whether the industry expects demand for new construction activity to rise again and if so will that new activity finally translate to significant increases in construction employment, demand for new equipment and a renewed sense of optimism among contractors?” said Sandherr.

On a positive note, he said that 20 percent of the firms surveyed plan to add employees to their staffs in 2013, while 9 percent expect to make layoffs. Seventy-nine percent plan to add 15 or fewer people, while 13 percent plan to add 25 or more workers.

“Firms are more optimistic about the outlook for hospital and higher education facilities, with 38 percent expecting demand for these types of structures to grow, while 39 percent expect this area to remain stable,” said Sandherr.

However, he said, “the news is not all good,” before turning the session over to Ken Simonson, chief economist for AGC.

“Unfortunately there are as many causes for concern as there signs of optimism,” said Simonson. “The demand for public buildings is sure to decline again, manufacturing work has been slacking again … material costs continue to rise and many firms are reluctant to make investments in new equipment.”

He continued, “Many firms expect the demand for public construction to decline in 2013; specifically, 40 percent of respondents expect demand for public buildings to shrink while only 18 percent expect that market to grow. Another 37 percent report that they expect demand K-12 school construction to shrink while only 20 percent expect it to increase.”

However, the numbers of projects that have been cancelled or delayed due to tight credit conditions was down for 2012, according to the survey.

“Forty percent of contractors reported having projects cancelled or delayed because of tight credit conditions during the past 12 months, while a year ago 49 percent reported delays or cancellations,” said Simonson.

Another factor that will play into the 2013 market is rising costs for both health care and materials.

“Seventy-seven percent of firms expect to pay more for health coverage this year while 90 percent of firms expect to pay more for materials this year,” said Simonson.

Overall, Simonson reported that only 20 percent of the companies surveyed said they expect the overall construction market to grow in 2013, while 46 percent don’t expect it to grow until 2015 or 2016.

“In other words, 2013 should be a better year but not a great year for most construction firms,” he said.

The full results of the survey are available on AGC’s