The Southeast’s construction economy continues to show significant growth, evidenced by a still-strong residential market and a recent rebounding of the health care sector, contractors and engineers say. But workforce shortages are escalating to new heights, they add, putting pressure on prices and tending to push out schedules.
Click here to view the 2015 Top Starts in the Southeast
“We haven’t seen any drop-off at all,” Rob Taylor, president of contractor Brasfield & Gorrie, says of contracting activity throughout the four-state region. Ticking off the Southeast’s hot spots, he says, “The Atlanta market is extremely strong. South Florida continues to boom. Orlando’s pretty consistent. And Raleigh and Charlotte are extremely busy.”
And while the region’s construction economy is continuing along a mostly consistent positive trajectory, markets are shifting.
In North Carolina, for instance, a $2-billion statewide bond measure aimed at funding public infrastructure—including public buildings—could benefit higher education construction spending, among other project types, says Jill Wells Heath, president and CEO of CALYX Engineers + Consultants in Cary.
“We’re already starting to see owners gearing up for that,” Heath says, noting that 76 of North Carolina’s 100 counties have projects identified for funding by the bond measure. “We think there’s going to be a lot of opportunity.”
Heath adds that North Carolina’s health care construction market “has really picked up.”
“I think there’s a lot of pent-up (demand) with health care,” she says. “We’re seeing a lot of activity right now.”
Taylor, with Brasfield & Gorrie, is seeing similar improvement in the health care construction market elsewhere in the Southeast, with the rebound occurring within roughly the past six months, he estimates.
For the past few years, contractors had noted the decline in number and frequency of major hospital expansions, thought to be a result of uncertainty related to the implementation of the Affordable Care Act. But now, he says, major hospital projects priced out at $200 million and above are becoming more common.
“It seems that everybody has figured out where they want to go based on the new (health care) regulations,” Taylor says. “That market had been pretty fat for awhile. But now the nonprofit and regional hospitals are really starting to dig in and go.”
South Florida, where the residential and multifamily market has produced a flood of construction activity in recent years, is seeing a change in the market as well, says Brad Meltzer, president with Plaza Construction in Miami.
Compared with past years, “We are seeing greater interest in retail, office and mixed-use multifamily of late,” he says.
All of this positive market momentum will continue to increase contractors’ workforce woes, says Taylor.
“It’s extremely tough; I’ve never seen it like this in 30 years,” he says. Calling the situation “a real struggle,” Taylor explains it’s limiting contractors’ ability to respond to construction delays and “probably extending job schedules.” Accelerating a project’s construction schedule is becoming increasingly difficult, he adds, saying, “You can’t do that at all anymore.”
In Miami, Plaza’s Meltzer is hoping for some relief from workforce pressures.
“With the condominium market appearing to be softening, we anticipate the workforce issues that have been a challenge for the past three years will begin to subside,” he says.
Top Starts Ranking
The continued upward momentum for the four-state region’s construction economy can be seen in this year’s Top Starts ranking. As a result of an increase in project valuations, this year’s list is 50 deep, compared with last year’s ranking, which included 25 projects.
Comparing the top 25 of the two lists, this year’s ranking comes out on top, with nearly $10.1 billion in new contracts represented, or roughly $1 billion higher than a year ago.
The strength of this year’s ranking—which lists the largest contracts to start construction in 2015—is apparent in another way. This year, 39 projects were valued at $100 million or higher, 17 more than a year ago.
A pair of transportation contracts—both interstate projects featuring managed lanes—top this year’s ranking. Three power projects made the top 10, representing that industry’s increasingly diversified generation sources, namely natural gas, solar and wind.
In all, this year’s ranking totals nearly $13 billion in contracts. We invite you to read on to see all of the heavyweight projects influencing the Southeast construction economy.
A primary source for this Top Starts ranking is Dodge Data & Analytics. Other sources include state transportation agencies, project websites and published news reports.