Construction Forecast: Cautious Optimism for 2013
Construction has seen a bit of a lull in 2012 in Texas and Louisiana, but local experts are noting signs that the industry will strengthen heading into 2013.
"We started 2012 off slowly, and then everything kind of picked up toward the middle to latter part of the year," says Brian Freeman, executive vice president and general manager of Texas operations for Skanska USA. "We saw a lot of good projects, but there's still a lot of pent-up demand. In the health care sector, infrastructure, even higher ed, Texas is a growing market."
According to McGraw-Hill Construction's Dodge outlook, total construction in Texas is expected to grow by about 15% in 2013 across all sectors, climbing to an estimated value of $58 billion. But the picture is a little more blurry for Louisiana. Overall, the Dodge data shows that the state will see a decline in construction of about 23%, sinking to an estimated value of $11 billion. Sector-wise, both states will see growth, along with some declines.
The Lone Star State hasn't suffered anywhere near the dramatic declines of other regions across the U.S., largely due to strength in the energy industry.
Major cities such as Houston and Dallas are seeing plenty of project opportunities. The markets have continued to see a steady amount of deal flow for the latter part of 2012, according to Brad Brown, president and CEO of TEXO, the Texas contractors association.
"However, I hear two resounding factors remain," Brown contends. "One, there is still hyper-competition in the pursuit of projects, and two, margins are not at the level firms would like to see or commensurate with the inherent risks of construction." He adds that "there is always a natural slowdown in opportunity flow around any national election, and now with that behind us, it could release some more opportunities heading to the new year. But overall—and it gets said a lot—we are extremely fortunate to have the type of opportunities we have in our region."
The Dodge data forecasts that several sectors will climb in 2013, including electric utilities by 96%; institutional (which includes government service buildings, health care facilities and other non-residential sectors) by 7% and manufacturing by 53%. Growing by just 1% will be the commercial sector (which includes hotels, offices and banks, parking garages, stores and warehouses).
Freeman points out that health care work has flattened out over previous years. "I think a lot of that was the health care bill and the election, but I think in 2013, health care and infrastructure are both going to be very big just because people have to meet the new requirements of the health care bill," he says.
The forecast data also shows that public works, which includes bridges, dams, reservoirs, sewage treatment, waste disposal and streets and highways, will decline 19% in 2013.