Construction starts in Colorado next year are expected to increase by 21%, with total new construction reaching $13.4 billion, according to a recent forecast from Dodge Data & Analytics (formerly McGraw Hill Construction).
DDA predicts that 2014 will finish with a little more than $11 billion in new work in Colorado. If the 2015 totals are achieved, it would return the state to the prerecession highs of the early 2000s.
In Utah, 2014 starts are headed toward a 4% increase over 2013, at $6.3 billion, and DDA expects the Beehive State to reach $7.45 billion in new work in 2015, a 15% jump. That would be the highest total for new construction work in Utah since 2007.
When those increases are compared with DDA's projected 3.3% increase in the overall U.S. economy for 2015, it is clear that industry economists and insiders are painting a picture of a region that is going through a prolonged upswing.
"Overall, the [Mountain States] region is very healthy and looks like it will stay that way, at least for the near future," says Cliff Brewis, DDA's senior director of editorial integration. "You're definitely in a boom cycle here, fueled by oil-and-gas, population growth and private-sector work."
DDA forecasts strength in the following sectors: multifamily, expected to be up in Colorado by 23% in 2015; health care, up 100% after declines over the past three years; office construction, up 55%; hotels, up 17%; retail, up 16%; public projects, up 42%; and single-family homes, up 20%.
But some sectors will continue to struggle, with warehouses and manufacturing expected to decline 11% in Colorado; highways and bridges, down 2%; and education, mostly K-12, down 33%, DDA says.
"However, the education sector, which has been bumping along the bottom, is poised for improvement nationwide," says AGC of America chief economist Ken Simonson. He points to a number of large school bond issues that passed in the November elections, including a nearly $500-million measure for Boulder County Schools.
AGC is predicting a 4% to 8% increase for nonresidential construction sectors across the U.S. in 2015, led by growth in manufacturing, lodging and power projects. Much of the economic strength in the Mountain States region comes from the "shale gale," Simonson says, referring to the surge in shale and natural gas production in the area, especially in Montana, eastern Wyoming and northern Colorado. He cautions, however, that the region could be hurt economically if the recent dive in oil prices continues.
"The construction market looks strong going into 2015," says Michael Gifford, president and CEO of AGC Colorado. "Economic development efforts are paying off, with increasing private commercial and residential project announcements across the Denver area. The oil-and-gas market is providing a lot of dollars to the system. The challenge will be infrastructure funding to keep up with the growth."
Infrastructure remains a concern. The U.S. transportation construction market will grow only 3.1%, to $191.7 billion in 2015 from $185.9 billion in 2014, according to a forecast by American Road & Transportation Builders Association. ARTBA says its analysis is tempered by two key factors: uncertainty over long-term federal funding, which represents 52% of state DOT capital outlays, and still-recovering state and local budgets.
But highway funding in Colorado seems poised to improve, if somewhat slowly. "We expect the horizontal construction market to remain fairly strong here in 2015," says Tony Milo, executive director of the Colorado Contractors Association. "While we are seeing increased opportunities statewide, the growth is especially strong along the Front Range."
"I continue to hear from AGC members across Idaho that they are optimistic when it comes to the outlook for 2015," says Wayne Hammon, CEO of Idaho AGC. "We have seen strong gains in the multifamily, food processing and manufacturing sectors, and most believe this will continue."
"2014 saw increased construction activity from nearly all sectors, and we anticipate more of the same in 2015," says Rich Thorn, AGC of Utah president and CEO. "Utah seems to be moving in a positive direction with unemployment hovering around 3.4%, and manpower issues are becoming more prevalent."
DDA forecasts strong growth in 2015 for Utah in multifamily, up nearly 33%; health care, up 50%; hotels, up 40%; offices, up 100%; and solid increases in retail, public works and warehouses. The only big concerns: a more than 40% drop in highway work and significantly fewer water projects, down from $147.5 million in 2014 to an expected $53.5 million in 2015, DDA says.
The "2015 Utah construction market seems to be following the rest of the nation with improved opportunities, more spending from the private sector and an uptick in the overall economy," says Josh Van Orden, president of V.O. Brothers Mechanical, Ogden, Utah.
Contractor backlogs are reaching post-recession peaks across the region as well. "ABC's Construction Backlog Indicator reached a new all-time high during the third quarter of 2014, at 8.8 months, and indicates steady growth in the Western states," says Mark Latimer, president and CEO, Associated Builders & Contractors, Rocky Mountain Chapter in Denver.
Regional design firms are also optimistic. The American Institute of Architects' Architecture Billings Index continues to rise, and area firms report more work, even in the mountain resort areas, which were hit hard by the recession. "As the overall economy improves, the mountain and Western Slope markets, which have been lagging the Front Range, should begin to catch up," says Peter Monroe, a principal at Monroe & Newell Engineers Inc. and the current president of the American Council of Engineering Cos. of Colorado.
But most firms across the region say they continue to have trouble finding enough qualified people to handle the volume of work. A recent AGC survey revealed that 83% of construction firms in the U.S. say they are experiencing labor shortages. "And that's 93% for firms in Colorado," Simonson says.
The shortage extends to design firms and project executives. "AIA Colorado's job board continues to see postings approaching prerecession levels, especially for architectural interns, job captains, project managers and project architects," says Kevin Eronimous, 2014 president at AIA Colorado.
"We are strategically planning for a long-term craft developmental program to increase the number of skilled craftsmen in Utah. Without them, our industry is dead in the water," Van Orden says.