Los Angeles Construction Activity Booms in January

Construction activity blossomed in Los Angeles during January as the value of projects initiated by developers more than doubled from a year earlier, the city said Friday.

Last month developers pulled permits for projects valued at $335 million, a 103 percent increase from the $165 million in January 2012, said the city's Building and Safety Department.

The permits are for both residential and commercial projects.

It reflects a trend taking hold in the overall economy, said Bud Ovrom, the department's general manager.

"It think it's a slow but steady recovery of the economy and I think slow and steady is probably better and more sustainable for us than the peaks and valleys of bubble we experienced," Ovrom said.

"I'm very encouraged by these numbers."

The construction sector is gaining ground, according to permit activity during the first half of the city's fiscal year.

From July through December the city issued permits for projects valued at $1.8 billion, up from $1.5 billion in the first half of the 2011-2012 fiscal year.

But there is still a lot of distance between where the city is now and the activity levels prior to the Great Recession.

For the first half of fiscal years 2004 to 2007 the city issued permits for projects valued at more than $2 billion. Activity peaked at $2.8 billion in the first half of the 2006-2007 fiscal year, then began falling.

It bottomed out in the first half of the 2009 fiscal year when permits were issued for projects valued a $1.1 billion.

Kimberly Ritter-Martinez, economist at the Kyser Center for Economic Research in Los Angeles, agrees that the sector is on an upward trajectory.

"It's just one more positive indicator that the commercial real estate market is starting to come back," she said of the January gain.

But the big year-over-year percentage gain reflects how far the industry sank during the downturn.

Ovrom said there are some big projects now under way in the city. They include:

• Baxter BioScience's six-year, multimillion dollar upgrade of its 269,000-square-foot manufacturing facility in the 4500 block of Colorado Boulevard just north of Atwater Village. The project includes replacing a manufacturing facility as well as new cafeteria, training facilities and office space.

• The L.A. Marriott's Courtyard Hotel and Residence Inn is going up downtown across the street from L.A. Live. The $168 million project will add the 373,000 square feet of space.

• The Broad Museum, which held a topping out celebration last month as the last steel beam was set in place. The $130 million contemporary art museum is expected to open in the middle of next year.

All in all, it's a good sign, said William W. Roberts, director of the San Fernando Valley Economic Research Center at California State University, Northridge.

"It consistent with the general improvement in the housing market," he said. "Housing and construction are basically what pulled us out of every recession since World War II."

Read More

Can Construction Hiring Propel the Washington Region’s Economic Recovery?

Although steady job growth in the construction sector has recently spurred optimism about the strength of the nation’s economic recovery, economists and local construction executives say the industry is poised to make only modest contributions to the growth of the Washington region’s labor market this year.

These forecasts reflect the unique composition of the Washington area economy: Its housing market has room for improvement, but not as much as in other parts of the country where it plunged to greater lows. And the steady demand in housing is tempered by inertia on projects in the commercial and federal sectors, where the desire for new construction has been dampened or put on hold as prospective clients grapple with government belt-tightening and the prospect of “sequestration,” a series of deep, automatic federal budget cuts.

“While I see [construction hiring] being positive, I don’t think it’s going to grow dramatically as a share of the economy” in the Washington region, said Ken Simonson, chief economist for the Associated General Contractors of America.

Simonson projects that construction employment will grow 5 percent nationwide in 2013, but he said he would “shave a few percentage points off” that figure for this region.

Economists said the relative strength of the local residential construction market is largely contingent on one key factor.

“D.C.’s population growth has been nothing short of amazing,” Simonson said.

Indeed, the Census Bureau estimates that the District’s population surged from about 602,000 to about 632,000 between April 2010 and July 2012, a 5.1 percent increase. The nation’s population is projected to have grown just 1.7 percent in the same period.

Many of the newcomers are young professionals, and their arrival has helped create robust demand for multifamily housing developments.

Bozzuto Construction, a Greenbelt-based firm that focuses on multifamily and mixed-use development projects, said the appetite for these types of properties will translate into hiring this year.

Michael Schlegel, the company’s president, said Bozzuto plans to hire 10 to 15 salaried workers in 2013 for jobs such as superintendent and project manager. He also expects 1,500 people will be working on Bozzuto construction sites on an average day this year, a jump from the 1,150 that worked on an average day in 2012.

While residential construction projects are expected to spur local construction hiring, the same can’t be said for projects in the federal and commercial space.

Amid federal cuts, government agencies and the companies that contract with them are likely to shrink their real estate footprints as they trim their workforce. James Bohnaker, associate economist for Moody’s Analytics, said this would increase the amount of available office space on the market, thereby decreasing demand for new construction. And even those who are interested in breaking ground might want to wait until uncertainty over the sequester passes.

Will Thompson, vice president and district manager for Hensel Phelps Construction’s Mid-Atlantic division, said his firm’s need to add workers in this region is contingent on whether it is awarded contracts for several large federal and private projects.

But in the current climate, “everybody’s kind of on hold and waiting,” Thompson said.

Data from 2012 offer a framework for the modest forecasts for the sector’s hiring this year. Construction added just 1,800 jobs in this region last year. And according to data from the National Association of Home Builders, there was a 34 percent increase in 2012 in the number of building permits issued nationwide. But in the Washington area, the uptick was much smaller: 18 percent.

Read More

Jump in Housing Starts Fuels Rise in Construction

The construction industry is beginning to feel the good effects of the slow but steady recovery in the city's housing market. Spending on new residential construction jumped 54% in 2012 from the prior year and has more than doubled since 2010, according to an annual report of construction spending from the New York Building Congress. That led to an overall expansion of 5% for the design and construction industry in 2012.

Residential starts, or spending on new projects, reached $5.1 billion last year, accounting for 32% of the total of $16.1 billion in new construction starts. In 2011, new housing development accounted for only $3.3 billion. Still, housing remains well below the peak. It is also below 2008 levels, when the bottom began to fall out of the market. Even then, spending was at $5.9 billion.

"It's still well below the peak of the market, when the city was building in excess of 30,000 units a year for five years," Richard Anderson, president of the Building Congress, said. But he noted it is also considerably better than the doldrums of 2009, when there were only 6,000 new residential starts.

"The market's been climbing back, and we could be as high as 15,000 units this year, which would still be half of the peak years," Mr. Anderson said. "But it's a nice increase, if you look at it the other way, that figure would be almost 200% of the bottom year."

This is but the latest sign of a housing market recovery in the city, another being a rise in hiring by residential brokerages in the city.

The rest of the construction market is fairing less well, however.

Public works remains an important source of work for the design and construction trades in the city, but it has fallen through the recession and since, hitting $2.1 billion in starts last year, down from $2.4 billion in 2011 and from $5.7 billion in 2008. Commercial construction is also contracting, falling 7% last year, to $8.9 billion, down from $9.6 billion in 2011.

"The economy is not generating a lot of jobs, which is bad for commercial development, and, on top of that, businesses are figuring out how to operate within smaller and older spaces," Mr. Anderson said. "Out of some 20 office projects my members have on the boards, only two, Hudson Yards and Brookfield's West Side project are rising."

Still, two of the three largest new projects last year, including the biggest, were commercial developments: the $400 million renovation of Macy's Herald Square and the $250 million renovation of the Winter Garden and shops at the World Financial Center downtown. The second biggest was a $325 million project to build entrances for the Second Avenue Subway at East 96th Street.

Even if it may not account for the biggest ticket projects, residential development looks like it will remain the core of new work for the industry for the foreseeable future, Mr. Anderson said.

"When people build residential units, they express confidence in the city of New York, because people have to come in and buy these units and rent these units," he said.

Unevenness in the market may not be a bad thing, either.

"This is, to me, a strong market, and a rather typical market," Mr. Anderson said. "Five, six years ago, we were clicking on all cylinders. Now, we're back to normal, which is a market where certain sectors are stronger than others."

Read More