Industrial construction to rise

Trend continues of renting or leasing homes.

Photo credit: ©istockphoto.com/Rich Legg

In analyzing the 2014 industrial construction takeoff quarter, we consulted industrial components expert Steve Letko regarding the geographical regions’ growth and the intensity of the product components comprising anticipated overall end-use growth.

Although indicating a softening demand, particularly noted in the subdued commercial and public sector construction markets, Letko predicted ample availability of raw materials required for production would not impact the overall material cost or price factors in the early part of the year.

Letko’s overall nationwide analysis revealed some growth in the U.S. as a whole during 2014. But his anticipation noted subpar peak levels reached after the end of the Great Recession. While residential construction growth, predominantly single-family housing at a roaring 26% and multifamily building at 11%, will signify a major comeback, much of it will be dedicated to long-term leasing and monthly rental contracts.

Nonresidential construction also will be a strong additive with an 8% growth factor. Office building construction will add 15%, while hotels and motels will supplement 16% additions. General commercial activities will be chiming in another 15%, while institutional development of all types will add on a modest 2%.

Nonbuilding construction will be down 9% from 2013; while electric utilities, caught in the coal-to-natural-gas bind, will likely drop off materially with a thumping 33% from last year’s level. However, this lull may signal a lofty rebound in 2015, as major new projects come off the drawing board.

This not only includes a growing number of natural gas terminals to ship America’s abundant supply the world over, but a strong concentration of natural gasfield projects in the mid-Atlantic and Northeastern parts of the country. These two areas alone have more than $9.6 billion in planned natural gas-fired project starts. In total, close to $30 billion is being planned for 250 natural gas-fired projects (capital and maintenance by the end of 2014).

Region-wise, the South Atlantic projects the largest pickup activity with a total of 16% over 2013. In descending order, the Far West follows at 10%, Midwest at 7%, South Central at 8% and the Northeast at 4%.

Also looking like a sure bet are additional pipeline construction activities to interlock the expanding shale development with America’s proliferated refinery matrix. These forecasts are based on official data by relevant agencies for 2014 scheduled construction starts. However, these targets are cautiously optimistic, barring the turbulence of unexpected and restrictive government policies, and the outcome of budget, tax and debt ceiling negotiations.

Renting or leasing homes

When assessing the major housing recovery occurring in 2013, some analysts believe that the homeowning of yesteryear is back on the comeback trail.

Nothing could be further from reality. Although overall percentages of mortgage-based ownership as opposed to rentals is as not yet clear-cut, it’s estimated that residential new construction includes a significant and growing percentage of new buildings dedicated to rentals or long-term leasing.

Also becoming more significant is the purchasing of “homes for rentals” by foreign investors. There are two major reasons as to why this impetus toward a housing comeback will accelerate into 2014 and beyond:

The U.S. population is on track to reach the 400 million mark during this century. A combination of new generations and a fear of getting stuck with substantial mortgages during another housing recession, rather than “flipping” at higher prices, makes major additional “temporary shelter” in upcoming years almost inevitable.
With high unemployment an unpleasant economic factor, this makes instant mobility in filling job openings in various parts of the country a mandatory necessity. Such a situation guarantees rental residential homes and apartment buildings as the dynamic behind America’s future residential construction.

Housing construction and all the amenities that accompany residences of today and tomorrow will continue to be the keystone that will keep general contractors, construction workers and a variety of subcontractors busy well into the rest of this decade.

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Veteran industry analyst and writer Morris R. Beschloss is the industrial PVF columnist for BNP Media’s Plumbing Group titles and is the American Supply Association’s industry analyst. Beschloss, whose career in the industrial pipe, valve and fittings sector spans more than five decades, was the recipient of the 2012 ASA Fred V. Keenan Lifetime Achievement Award.