Nonresidential construction grew in November and accelerating hiring by architects and engineers suggests future growth, according to Ken Simonson, Chief Economist for The Associated General
Contractors of America (AGC). Simonson was quoted in the November 6 issue of Building Design & Construction News.

According to AGC, residential construction spending was down 16 percent from the year before while nonresidential was up almost 17 percent. That means that residential construction workers - as many as 400,000 of them - were doing nonresidential work.

Architectural and engineering employment rose 3.7 percent in the past 12 months, triple the growth in the overall economy, AGC reported.

Source: Building Design & Construction News

Taylor-Morley Homes, one of the area’s largest home builders, has allegedly defaulted on a $16.5 million loan according to a suit filed last month by Southwest Bank of St. Louis. According to the St. Louis Business Journal, Taylor-Morley’s revenue took a hit last year after several years of growth. The Chesterfield-based home builder 2006 revenue was $74.7 million in revenue, down from $114.7 million the previous year. Taylor-Morley currently has 16 new-home communities on the market in St. Louis and the Metro East, down from 28 in March.

Source: St. Louis Business Journal

Engineering News-Record today reported that an overall decline in construction starts in the United States is more dire than predicted. McGraw-Hill Construction estimates that the industry experienced an 8% decline in construction starts in 2007. Another 2% drop is forecast for 2008.

Total construction reached a record $668.9 billion in starts in 2006, and values are expected drop to $626.7 billion for 2007 and $614.1 billion in 2008. Last year, McGraw-Hill Construction predicted that starts in 2007 would drop 1%, despite the weaking single family home market.

Turmoil in the sub-prime mortgage market has been a major concern for the construction industry and the overall economy. Tighter lending conditions  will impact both residential and commercial development.

Some positive trends are still seen in public works projects and school construction.

Although spending on private non-residential real estate projects jumped 17% in the past year, architects and builders are keeping an eye out for signs that the worldwide credit crunch may be spreading through the entire real estate market, according to Building Design + Construction.

The commercial real estate market has helped keep the economy afloat as the housing market has plummeted. But even before the housing slowdown, commercial lenders were  tightening standards and reporting that more developers were falling behind on loan payments.

U.S. banks and thrifts reported a 40% rise in past-due construction and development loans in the second quarter of 2007, according to the Federal Deposit Insurance Corp. Some contractors are reporting that lenders have reworked pricing and risk-analysis models.

Still, confidence remains high among architecture firms, which often are the first to lose work in a development slowdown. The American Institute of Architects’s July forecast high hit the second-highest level since the group starting keeping records in 1995.

New construction starts nationwide advanced 8% in June over the prior month to a seasonally adjusted annual rate of $662.4 billion, according to McGraw-Hill Construction. Nonresidential building showed an especially strong performance, surging up 29% over May, while residential building improved a moderate 4%, mostly due to a strong 40% increase in multifamily housing.

Excluding residential building from the year-to-date statistics, new construction starts in the first six months of 2007 were up 2% over 2006.

Source: McGraw-Hill Construction

High demand for highway construction means many contractors are carefully choosing the projects they bid, and state transportation departments are reporting a nearly 50% decrease in the number of bidders per project over the last four years, according to an article in this week’s Engineering News Record.

The trick for contractors is getting current projets to completion, given rising costs for asphalt, cement and labor. Asphalt prices are up 5% over last year, according to McGraw-Hill Construction Analytics/ENR, following a 42% increase in 2006 and a 10% hike in 2005. Likewise, concrete prices have been rising about 6% a year since 2005.

Suppliers who once offered 100-day price quotes on prices for cement and asphalt now will only commit to 30- or 60-day quotes. In an effort to keep projects moving along, state transportation departments are accepting fuel price escalation clauses and flexible start dates. Many, including the Missouri Department of Transportation, are turning to design-build delivery as a solution to cost volatility.