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Construction Costs Rise 4.2% to 4.6% for Light-framed Buildings in September
For the 25 cities shown in the accompanying charts, the year-over-year increase in construction costs ranged from 4.2% to 4.6% for four light-framed building categories. Specifically, the increases on average were +4.2% for a typical 3-story factory, +4.4% for an auto sales garage and an aircraft hangar and +4.6% for a warehouse, September 2007 versus September 2006. Among the 25 cities studied, the highest year-over-year construction cost increases were recorded in Miami and the lowest in Kansas City.
Construction Equipment Shipments Remain Depressed
Construction equipment shipments from U.S. factories are expanding slowly after the collapse at the beginning of the year. This is being driven primarily by rising exports and falling imports in response to the 31% drop in value of the U.S. dollar since the peak in 2002. Earthmoving and lifting equipment sales continue to improve, with customers facing record-long delivery lead times. However, other equipment sectors have weakened, especially the smaller machines used in residential work.
Construction Equipment Shipments Steady Now; Expected to Rise 7% in 2008
Late in 2007, construction equipment shipments from U.S. factories are stable at 25% below their 2006 average. This is the combination of a 40% decline in purchases by U.S. fleets and a 30%-plus rise in equipment exports from a year ago. Both equipment purchase and rental prices have weakened, barely rising in the last three months and up only 2% from a year ago. Ahead, U.S. equipment shipments are expected to rise 7% in 2008 and equipment price increases will be in the +2% to +3% range.
Construction Inflation Soars in November
Construction materials costs increased 1.4% in November 2007 from October and now stand 5.3% higher than last November, ending six months of negligible cost increases. The November surge was primarily for fuel products. More gains are ahead, but at a slower pace. Cost trends between construction sectors are widening. The figures in the table which accompanies this report are based on the Producer Price Index series published by the U.S. Bureau of Labor Statistics.
Construction Materials Price Index Down 0.2% in October
Construction materials prices fell 0.2% in October 2007, with the index now back to the May level. The significant price declines in October were mainly for residential materials. Slowly slipping materials demand in the U.S. will restrain materials price increases into the winter, but the falling U.S. dollar and strong growth in world commodity demand will dominate pricing. Reed Construction Data expects about at least a 4% inflation trend from next spring through 2009.
Construction Outlook Weakens Due to Second Round of Credit Tightening
The outlook for construction spending weakened slightly since last month for the end of 2007 and the early part of 2008 due to a second round of tightening of credit approval standards and increases in commercial mortgage rates. Some spending will be lost and some will be pushed out until later next year or into 2009. Most of the key market drivers for non-residential construction remain clearly positive, but are not as strong as earlier this year or in 2006.
Construction Spending will Decline 2.3% in 2007; Then Climb 4.2% in 2008
The largest month-to-month decline in single-family construction spending in the ongoing housing recession dropped total construction spending 0.8% in October 2007. Several more small housing-driven declines in total spending now appear likely to finish out the year. Looking ahead, residential construction will remain below underlying demographic demand; non-residential construction will make a further 19% gain in this cycle; and heavy/engineering work will continue to expand at a 12% annual pace.
Construction Starts Decline Again in October
Reed Construction Data announced today that the year-to-date value of construction starts through October 2007, excluding residential contracts, totaled $254.840 billion, 13.4% higher than in 2006. However, the individual month of October was down 9.7% from September. October starts were 5% above the average month in the first quarter of this year, when starts dipped briefly before rebounding to record-high levels during the summer.
Construction Starts Inch Higher in November
Reed Construction Data announced today that the year-to-date value of construction starts through November 2007, excluding residential contracts, totaled $276.626 billion, 12.9% higher than in 2006 and up 2.2% from October. November starts were 20% below the peak level reached in June to August of this year. The recent slowdown is more than the usual seasonal decline, suggesting that the long boom in non-residential construction is ending, at least in some construction markets.
Controlling Heat Transfer in Green Buildings
Heat travels in and out of buildings in three ways: radiation, convection, and conduction, all of which must be addressed to reduce unwanted heat transfer effectively.
