Having long lagged other U.S. regions in economic recovery, the Midwest gained considerable momentum in 2014—welcome news to the region's construction industry. By all indications, the region will enjoy an even more robust 2015, according to Anirban Basu, chief economist with Washington, D.C.-based Associated Builders and Contractors (ABC). Ken Simonson, chief economist with Arlington, Va.-based Associated General Contractors of America (AGC), agrees, though he predicts growth will be uneven, noting that for every Chicago, there is a Gary, Ind. With growth comes challenges, including a depleted labor force among construction industry trades.
While some sectors, commercial included, are poised for steady improvement, others continue to underperform. And, as ever, environmental issues continue to shape both policy and industry practices. As regional players prepare for new opportunities and challenges, here are some of the issues, markets and enterprises worth watching in 2015.
The Great Lakes
Tainted drinking water prompts action to restore the lakes and prevent pollution
Last year wasn't good for the Great Lakes, notably Lake Erie, where algal blooms have become a rite of summer. First come the rains, then phosphorus-laden river discharges, followed by blooms, some toxic, that cut across large swaths of water. Last year's outbreak proved mild relative to 2011 and 2013, but deprived 500,000 residents in and around Toledo, Ohio, of tap water for several days in August. It proved a tipping point in the conversation about conservation, and whether improvements made under the Clean Water Act of 1972 are unraveling due to culprits ranging from agricultural practices to global warming to sprawl. Although the Obama administration began addressing the issue in 2010, the U.S. Environmental Protection Agency (EPA) issued more aggressive plans to restore the Great Lakes just weeks after the Toledo ban, including cleaning up rivers and harbors and reducing phosphorus fertilizer runoff. Involving 15 agencies and eight Great Lakes states, the five-year initiative is the largest of its kind in U.S. history, according to EPA .
The Industrial Sector
Can the Midwest reclaim its status as the nation's dominant region for manufacturing?
"Manufacturing in Chicago is an old heavyweight slugger punching below its weight," or so concludes "Revival in the Heartland: Manufacturing and Trade in Chicago," a July 2014 report issued by HSBC and the Chicago Council on Global Affairs. "The same holds true for manufacturing across the Midwest," according to Richard C. Longworth, author of the report. Among other factors, Basu attributes the region's woes to a shift to the Sunbelt, particularly among foreign-based manufacturers. "The Southeast has effectively replaced the Midwest as the nation's leading center for manufacturing," says Basu, citing the Sunbelt's more favorable regulations, incentives and land and utility costs. "South Carolina, Alabama, Tennessee, Mississippi and Louisiana also share a common trait. They're right-to-work states," he says. Not that some sub-segments aren't performing in the Midwest. "Due to its infrastructure, the region continues to thrive as a warehouse and distribution center," says Basu. "It may be infrastructure that one day draws manufacturing back to the region." To enhance its prospects, the Obama administration in 2014 selected Chicago and Detroit as sites for federally funded manufacturing institutes, with Chicago focusing on digital manufacturing and design and Detroit on advancements in lightweight metals. The Detroit Institute will be led by a consortium of 60 companies, nonprofits and universities, and its Chicago counterpart by 73 such interests. Both will match $70 million in funding provided by the Department of Defense.
As Midwest markets heat up, so does the quest for qualified construction workers