Are We There Yet? – Market Conditions Optimal for the Construction Owner
Anecdotal evidence (word of mouth) suggests that the Central Florida construction sector remains slow with only hints of improvement. General contractors continue to experience extremely slow recovery in new business generated and profit margins are very slim. Even with such slight improvement in revenue, general contractors believe that they are seeing the first signs of inflation in material supply. Labor supply companies are seeing some additional placement of construction personnel as employers out-source rather than hire to avoid paying benefit packages. Labor rates are increasing.
The fact is that credentialed economists validate this real-life experience of contractors and subcontractors/suppliers. Construction spending hit a three-year high in September 2012 – $852 billion, according to the Associated General Contractor of America, although across some areas of the country construction spending dipped below 2011 levels. Analysis performed after the November 6 presidential election concludes the following for 2013:
- Materials costs are not extreme but will outpace the Consumer Price Index (CPI) – expect 2-4% increase in material costs from Dec 2012-2013;
- New construction of apartments will boom, although single family new construction remains a mystery;
- Multi-family, which includes condominium, shows continued high inventory while rental rates are up and vacancy rate in apartments is at a 10-year low.[i]
The time to renovate is now. Our owner clients see the benefit of contracting for required maintenance or upgrades of their properties in 2013. Our contractor clients are always happy to get good work.
[i] Special thanks to Ken Simonson, chief economist of the AGC, for his always astute forecast.