Capitol Update 4/05/2022
The construction industry as a whole stands to sustain significant damage from boycotts of Russia over the invasion of Ukraine, according to an analysis by GlobalData. The harm will come in the form of higher energy and materials prices, although individual construction and other firms will suffer only minor direct damage from leaving Russia, GlobalData says.
Full Story: Global Construction Review (UK)
A focus on programs rather than individual project delivery will help state and local governments avoid supply chain snarls and achieve results using funds coming their way from the bipartisan infrastructure law, says Maria Lehman, president-elect of the American Society of Civil Engineers. Furthermore, entities receiving the funds should work collectively to determine “how you’re getting the products, how you’re moving it to where it needs to be, how you’re buying it, how you’re implementing it,” Lehman says.
Full Story: Transport Topics
The economic earthquakes of the past few years have posed challenges for the construction industry, and it doesn’t appear things are about to change as the Associated General Contractors of America prepares for its annual convention. AGC Chief Economist Ken Simonson and Brian Perlberg, the association’s senior counsel of construction law and contracts, reflect on four key factors for the industry moving ahead: the Russia-Ukraine conflict, construction’s warehouse and manufacturing sector, the distribution of infrastructure funds and the incorporation of pandemic risk in contracts.
Full Story: SmartBrief/Infrastructure
In February, unemployment rates were lower in 31 states and the District of Columbia and stable in 19 states. Nonfarm payroll employment increased in 27 states and was essentially unchanged in 23 states and the District.
The Federal Reserve needs to raise interest rates above 3% before the end of this year to fight inflation, said James Bullard, president of the Fed’s Bank of St Louis and member of the Federal Open Market Committee. “The committee will have to move quickly to address this situation or risk losing credibility on its inflation target,” he said.
Full Story: Financial Times (subscription required)
Gas tax suspension would erode infrastructure funding, road builders say
In an effort to mitigate the effects of high gasoline prices across the country, six Democratic governors requested a pause on the 18.4-cents-per-gallon federal gas tax through the rest of 2022. However, the American Road & Transportation Builders Association said the measure could unravel the revenue structure and transportation funding in the Infrastructure Investment and Jobs Act. That’s because the bill would authorize the Treasury Department to use general fund dollars to replace the temporarily lost revenue from the halted gas tax. Since the Highway Trust Fund is flush with an additional $118 billion from the Infrastructure Investment and Jobs Act (IIJA), its supporters say the Federal Highway Administration can afford it.
Towns and cities across the US are installing electric vehicle charging stations, and the trend is not confined to the US. Glasgow, Scotland, will install 164 charging stations this year. Full Story: The Associated Press
Why modular has not clicked in commercial construction
Visions were grand, forecasts ambitious: Permanent modular construction would change the industry, saving time, money and the environment. But years after its initial adoption in the U.S., it accounted for just 5.5% of new construction last year in North America, according to the Modular Building Institute (MBI). Despite promised cost savings, environmental benefits and quicker return on investment, contractors are still running into roadblocks using modular construction. Many face a steep learning curve, and there can be snafus with design, manufacturing, transportation and assembly, they say. “On paper, and if all goes according to plan, modular construction should result in both time and cost savings. But modular techniques have not cracked the code fully on commercial, and other more complicated, construction types,” said Raja Ghawi, partner at Era Ventures, a proptech-focused venture capital firm, who previously worked as an investment director at Boston-based Suffolk Construction.
US eases tariffs on UK steel and aluminum
The United States reached a deal with the United Kingdom to partially lift tariffs on steel and aluminum exports from the U.K. beginning June 1, the two countries announced Tuesday. The U.K. will be able to export a certain amount of steel and aluminum into the U.S. duty-free before tariffs take effect. In return, the U.K. will lift approximately $500 million worth of tariffs on U.S. products such as whiskey and blue jeans. The deal eases duties imposed in 2018 by former President Donald Trump. Trump imposed 25% tariffs on steel imports and 10% tariffs on aluminum imports as part of a strategy to prioritize domestic production and address an overcapacity of steel in China.
Could Zoom towns go bust?
COVID-19 shut down offices around the country in 2020, suddenly freeing people to move to smaller, less expensive cities, also known as Zoom towns. These cities, which increased in popularity among Americans who use videoconferencing to work remotely during the pandemic, are still attracting strong interest from apartment investors. In fact, interest in these metros, like Boise, preceded the pandemic. From 2009 to 2021, investment in these towns jumped more than 2,000%, according to RealPage. Scottsdale, Arizona-based Alliance Residential, the nation’s second-largest apartment developer, has moved into Zoom towns over the last few years. “We’re in a lot of different markets that we previously weren’t in — the Boises of the world or Colorado Springs or some of the smaller markets,” said Jay Hiemenz, president and COO of Alliance. As more dollars pour into Zoom towns and new apartments are being built, some people wonder what happens to these areas if workers are called back into the office. Overall, 4.9 million people left cities for rural areas in 2020, according to the U.S. Census Bureau. “Some of these markets were growing, but they weren’t growing fast,” said Todd Metcalfe, a senior economist at Moody’s Analytics. “Now, all of a sudden, they’re outpacing everyone. Long-term growth rates will come back to normal levels.” Huntsville, Alabama, leads the pack, with apartment stock there slated to grow by 16.5%. Other major Zoom towns such as Boise, Idaho; Charleston, South Carolina; Colorado Springs, Colorado; and Reno, Nevada, will all see inventory growth between 7% and 8% in 2022, according to RealPage. “If there are pockets of risk, it’s where you are seeing people who are putting shovels in the ground to develop units based on what they perceive to be this structural change in migration patterns because of the pandemic,” said Ryan Severino, chief economist for the Chicago-based commercial real estate services firm JLL. “I’m not sure how durable that is.”
Bidding wars break out in NY while San Fran multifamily properties struggle
New York City and San Francisco were the poster children for pandemic urban flight in 2020. As residents moved out of the two pricey coastal markets, landlords grappled with ballooning vacancies and rent decreases. New York saw one-bedroom rents fall 17.6% from March 2020 to January 2021, according to apartment listing service Zumper. In San Francisco, rents in one-bedroom apartments fell 22.6% from November 2019 to November 2020. Now, two years later, San Francisco and New York are rebounding, but they’re not recovering at the same rates. In New York, rents have jumped and occupancies have tightened so much that there are now bidding wars for rentals in the city. In San Francisco, rents have risen but are still below pre-pandemic levels.