SBE News

Capitol Update 7/3/23

Survey shows US construction costs are world’s highest

A worldwide survey by consultant Turner & Townsend shows the US is the most expensive nation in terms of construction costs. New York City, San Francisco, Boston, Los Angeles, Chicago and Seattle all appear in the top 10 most expensive cities for construction.

Full Story: Engineering News-Record (tiered subscription model)

Newsom’s Package of Bills to Advance Environmental Goals Alarms Environmentalists (Ironic, Isn’t It?)

Last month, Gov. Gavin Newsom attempted to turbocharge California’s efforts to combat climate change: he proposed a package of no less than eleven bills to speed up the approval of clean energy, water, and transportation projects focused on achieving the state’s climate goals. That sounds good, right? Unfortunately, the bills significantly roll back the state’s environmental laws, including the California Environmental Quality Act (CEQA). Moreover, to fast-track the bills through the legislature, the governor proposed them as “trailer bills” to the budget, which would minimize the opportunity for review and comment. Story

Construction starts rise 8% in May

Residential construction starts decreased 4% in May, but a 24% surge in the nonbuilding category lifted total starts by 8%, according to Dodge Construction Network. The nonresidential category increased 8%. Total starts for the first five months of 2023 declined 6% compared with the first five months of 2022, led by a 25% drop in the residential category. Full Story: Dodge Data & Analytics

Contractors fear Buy America policy could backfire

The Build America, Buy America Act restricts contractors’ choice and inflates costs by mandating that all manufactured products, construction materials, iron and steel on federally backed infrastructure projects be sourced domestically, a spokesperson for the Associated General Contractors of America says. “A good example is of a contractor building a rest stop in Florida that includes a generator,” the spokesperson says. “The generator is made in the US, but several of the small parts on the generator are not made in the US, so that would not qualify.” Full Story: International Construction 

Architecture Billings Index registers May increase

The Architecture Billings Index reached 51 in May, rising from 48.5 in April and hitting the best reading since September. Inquiries into new projects and design contracts climbed to 57.2 and 52.3, respectively, but economist Kermit Baker has tempered expectations for future readings, noting “variation in the performance of firms by regional location and building specialization.”

Full Story: Archinect  

May PPI figures for construction offer mixed bag

The Bureau of Labor Statistics’ producer price index rose 1.2% year over year in May, a result that bodes well for the construction industry. The average PPI series for construction material costs declined 4.7% year over year, but the PPI bid price index increased 10.9% year over year as contractors tried to make up ground lost from surging input costs in 2021.

Full Story: Daily Commercial News (Ontario)

Biden administration planning bold energy policy moves

The Biden administration’s recently released semiannual Unified Agenda reveals an ambitious energy policy program for the remainder of 2023 and early 2024 that includes regulations on gas stoves, energy efficiency, methane emissions, electricity transmission and protections for the National Petroleum Reserve-Alaska. These initiatives have generated controversy and debates among lawmakers, industry representatives and environmental groups, underscoring the administration’s difficult task of balancing competing interests while advancing its clean energy goals. Full Story: E&E News

May jobless rates down in 11 states; payroll jobs up in 5 states

In May, unemployment rates were lower in 11 states and stable in 39 states and the District of Columbia. Nonfarm payroll employment increased in 5 states and was essentially unchanged in 45 states and the District.

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Consumer Survey Shows Reduced Inflation Expectations

Bloomberg reports on a University of Michigan survey finding that “US short-term inflation expectations fell in early June to a more than two-year low,” with survey respondents saying they “expect prices will climb at an annual rate of 3.3% over the next year, the lowest since March 2021 and down from the 4.2% expected in May.”

How construction is tackling the retirement challenge

The construction industry is challenged by “a lot more people retiring than coming into the industry,” says Brian Turmail of the Associated General Contractors of America. But an AGC-Autodesk survey finds the industry is joining similarly challenged sectors in addressing the problem by focusing on career programs at schools, career development, and online and video training, as well as improved pay, bonuses and benefits.Full Story: Society for Human Resource Management (tiered subscription model)  

Report: Cost escalation slows, but uncertainty remains

Nonresidential construction in 14 major cities across North America has experienced healthy growth this year because of slowing cost escalation, but residential construction has tapered, according to a report by Rider Levett Bucknall. “While demand for construction remains strong, possible inflation, bank failures and recession fears still feed the uncertainty and a potential slowdown for 2024,” says Julian Anderson, president for North America at RLB. Full Story: On-Site (Canada)

Fed Officials Expect Further Interest Rate Increases

Bloomberg reports Fed Governor Christopher Waller and Federal Reserve Bank of Richmond President Thomas Barkin “said the central bank may have to raise interest rates further to tame price pressures.” Waller “said Friday headline inflation has been ‘cut in half’ since peaking last year, but prices excluding food and energy have barely budged over the last eight or nine months,” while Bloomberg reports Barkin “said the central bank might need to tighten monetary policy further to reduce inflation and slow a resilient US economy and labor market.” Barkin said, “I want to reiterate that 2% inflation is our target, and that I am still looking to be convinced of the plausible story that slowing demand returns inflation relatively quickly to that target.” According to Politico, Fed officials “defied expectations this week by signaling two more interest rate hikes may be coming, but…also had a surprisingly upbeat message on the economy: They’re now more optimistic the U.S. can avoid a recession.”

Homebuilders Accelerate on Returning Demand

After months of a slowdown in the wake of weaker demand, homebuilders are starting to pick the pace of construction back up, reports Ashley Fahey of The Business Journals. Privately owned housing starts in May were at a seasonally adjusted annual rate of 1.63 million, a 21.7% increase from the April estimate of 1.34 million, the U.S. Census Bureau reported this week. That’s particularly important since homeowners now locked into low-interest rates are unlikely to want to sell existing homes. “There’s such a low level of inventory on the market (and) so many people are locked into very low-interest rates, which makes new homes one of the more available options in a lot of markets,” said Kelly Mangold, a principal at RCLCO Real Estate Consulting. The turnaround surprises George Ratiu, chief economist at Keeping Current Matters. Last year’s sharp increases in mortgage rates saw many buyers walking away from their contracts, forcing builders to offer concessions or sell portfolios to investors. After six months of dire predictions, he said buyers are suddenly returning to the market. Story

Q&A: Why industrial sector construction is cooling

Construction starts for industrial projects declined 38% in the first quarter compared with Q1 of 2022, according to research firm Newmark. The decline suggests the once highly active market has slowed as consumers spend less, says Kyle Roberts, executive managing director at Newmark. Full Story: Construction Dive  

What’s behind the manufacturing construction boom?

A Treasury Department study examines principal aspects of a surge in construction of manufacturing facilities, spurred partly by federal spending programs. The study looks at sectors — computers, electronics and electrical lead the way — a broader trend in nonresidential construction and the fact that the US surge appears unique among advanced economies. Full Story: Department of the Treasury  

Health wearables keep tabs on workers exposed to heat

Researchers are developing the next generation of wearable devices to protect construction workers from excessive exposure to heat and humidity. The latest wearables provide real-time physiological and hydration monitoring via the cloud, keeping workers connected with increasingly sophisticated biosensors to create a digital health ecosystem. Full Story: For Construction Pros  

Budget Deal Still Ignores $17.4 billion UI Debt

Contrary to claims that there has been no general tax increase in the state since 2011, failure to address this debt institutes one of the highest tax increases ever on California businesses directly and workers indirectly. In the latest report for June 9, 2023, California’s federal debt is $17.4 billion. Story

Construction material prices ease in May

The producer price index for final-demand goods in construction fell 1.6% in May, with energy prices leading the way with a 6.8% decline, according to the Bureau of Labor Statistics. Downtrends have been noted in lumber, structural metal and plastic, although cement, concrete and plumbing fixtures are expected to see price increases. Full Story: Dodge Data & Analytics

Calif. undercrossing project begins

A project to significantly reduce crashes at the Indianola Cutoff crossing on US 101 in California has begun with a groundbreaking by Granite Construction and the state Department of Transportation. The project is expected to take three years to create an undercrossing that lets vehicles avoid crossing at the same grade. Full Story: KRCR-TV (Redding, Calif.)  

Construction begins on Wyo.-Calif. wind power line

Construction has begun on the TransWest Express transmission line to carry power from the $5 billion Chokecherry and Sierra Madre wind farm in Wyoming to Southern California. The 600-turbine, 3-gigawatt wind farm is the largest in the US, a size that has raised environmental and aesthetic concerns. Full Story: The Associated Press

San Francisco development showcases adaptive reuse

The shell of a World War II ship-hull factory has been raised 10 feet to form the centerpiece of San Francisco’s Pier 70 development. When finished, the rehabbed Building 12 will provide a prime example of adaptive reuse to simultaneously adapt to rising seas and reduce carbon emissions, Markkus Rovito writes. Full Story: Redshift

Granite Construction wins work on US 101 project

Granite Construction will build the fourth mainline section of a 10.9-mile, $410 million project on US 101 under a contract with the California Department of Transportation. The $48 million job, which involves a segment in Santa Barbara County, includes bridge reconstruction and construction of additional bridges, widening to three lanes in each direction, sound walls and a ramp replacement. Full Story: The Construction Broadsheet  

Concourse project begins LAX expansion

A massive expansion of Los Angeles International Airport is underway with a project to add about 150,000 square feet and eight gates to Midfield Satellite Concourse South. The project uses off-site construction and relocation, in which nine segments are built nearby, then transported to the final location for assembly. Full Story: The Eastsider (Los Angeles)/City News Service