CHICAGO — A new year, a new outlook. CONTRACTOR interviewed industry professionals, from association and company presidents to marketing managers of manufacturing companies and construction industry consultants, and they all seem to predict that 2012 will be a bit better than 2011.
CHICAGO — A new year, a new outlook. CONTRACTOR interviewed industry professionals, from association and company presidents to marketing managers of manufacturing companies and construction industry consultants, and they all seem to predict that 2012 will be a bit better than 2011 — that there are positive industry trends occurring, making for a slightly improved business climate, yet certain areas of the country are having a rough time coming out of an economic downturn and the residential market is still slow to turn around.
Construction industry consultants FMI Corp., Raleigh, N.C., is forecasting a 3% increase in 2012 for construction put-in-place in 2006 dollars to show the effects of inflation. In current dollars it’s a nominal 6% increase.
“Our forecast calls for a 12% increase in residential construction for 2012,” FMI said in its Construction Forecast. “While that appears to be a strong recovery, consider housing is just starting to move off the bottom. The total represents stronger multifamily construction and home improvements as well as single-family housing; however, the total of $303.9 billion is equivalent to 1997 CPIP. In constant 2006 dollars, the gain is more like 9% for 2012.”
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On the commercial side, FMI data shows CII market sectors bottoming out in either 2010 or 2011 and beginning to increase in 2012. The two exceptions are religious buildings and public safety, both of which FMI is forecasting to bottom out in 2012 and resume growth in 2013.
Anthony J. Guzzi, president and CEO of EMCOR Group, expects a slight upturn in 2012, in line with the latest FMI Construction Outlook.
“Absent our acquisitions, our backlog is up 30%,” Guzzi said, “but it had fallen in half from the peak to trough. So going back up is a good sign, although it’s not a broad-based recovery in commercial, and residential has to eventually come up.”
Given the uncertain economic climate, such as the Euro crisis that may destabilize the world economy, it’s difficult to forecast.
“We live in an economy right now that if we have a three- to six-month window, that’s as good as it gets,” Guzzi said.
Guzzi believes that the government should reform the tax code to make energy saving projects more attractive. Accelerated depreciation or tax credits could lower the payback period and increase the ROI for commercial/industrial/institutional energy projects. CII energy work would employ more people than residential, save more energy and expand the nation’s green footprint more quickly, he said.
Energy service work can be profitable for many mechanical contractors, not just the largest ones, noted Guzzi. The energy service market can be split into three segments. The big work is done by ESCOs in the public sector; that’s the type of work where an ESCO sells a complete makeover to, for example, a public university, and the multi-million dollar project is financed out of energy savings. The second type of project is done for private owners where an engineer performs the study and the project goes out to bid. The third segment — the largest part of the market where many mechanicals can play — is just good replacement selling.
Dan Schmierer, president and chief executive officer, Viega LLC, is bullishly optimistic about 2012.
“We see single digit expansion in most commercial segments, Schmierer said. “Our overall targets are up about 15% in revenue for next year. Part of that is growth in our current market segments and part is introducing a new system or two. We’re guardedly optimistic.”
In terms of market segments, Viega is forecasting new single-family structures as flat, new multi-family structures up 6.5% and non-residential private construction up 7.5% in unit volume. Viega forecasts the power and utility segment up 25%, commercial structures up 10%, manufacturing structures up 4%, and healthcare down about 3%. Viega is forecasting that all public construction — highway and street, transportation, education, sewage and waste disposal — will be down 5% to10%.
“If you look at just the residential market — this is a real trend here — we see the rental apartments and large multi-family buildings together comprising almost 50% of the market, say 45% of the market,” Schmierer said, “and both of those figures are double what they were two to three years ago. The single-family structures have dropped from 70% down to 55%.”