Dodge, AIA, Census, CoStar Report Mixed Trends for Construction Starts and Demand


Submitted by the AGC.

Total construction starts in current dollars (that is, not adjusted for inflation) slumped 9% in July at a seasonally adjusted annual rate, Dodge Construction Network reported on Wednesday. “This decline follows a July that saw the start of two multi-billion-dollar LNG export plants. If these projects were excluded from July, August’s nonbuilding starts [, which tumbled 36%,] would have increased 27%. In August, highway and bridge starts moved 21% higher, environmental public works increased 39%, while miscellaneous nonbuilding starts lost 9%….August’s gain [of 7% in nonresidential building starts] comes on the heels of a massive increase in July that saw the start of several large manufacturing projects….Commercial starts were 22% higher in August, with all categories posting an increase. Institutional starts were up 62%, despite education and healthcare starts declining, and manufacturing starts lost 42% during the month.” Residential building starts rose 1%, with single-family down 10% and multifamily up 19%.

The Architecture Billings Index (ABI) registered a score of 53.3 in August, up from 51.0 in July and the 19th consecutive reading above 50, the American Institute of Architects (AIA) reported on Wednesday. AIA calls the index “a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months.” The ABI is derived from the share of responding architecture firms that report a gain in billings over the previous month less the share reporting a decline in billings, presented on a 0-to-100 scale. Any score above 50 means more firms reported increased billings than decreased billings. “During August, the score for new project inquiries rose to 57.9 from 56.1 the previous month, while the design contracts score softened slightly with a score of 52.3, down from 52.9 in July. ‘While a strengthening billings score is encouraging, the flat scoring across regions and sectors is indicative of a nationwide deceleration over the next several months,’ said AIA Chief Economist, Kermit Baker.”

Housing starts (units) in August jumped 12% at a seasonally adjusted annual rate from the July rate but dipped 0.1% year-over-year (y/y), the Census Bureau reported on Tuesday. Single-family starts rose 3.4% for the month but slumped 15% y/y. Multifamily (five or more units) starts soared 29% for the month and 31% y/y. Residential permits fell 10% for the month and 14% y/y. Single-family permits fell for the sixth-straight month, by 3.5% from July and 15% y/y. Multifamily permits plummeted 19% from July and 15% y/y. The number of authorized multifamily units that have not started slipped 2.7% from July but climbed 31% y/y. Although a growing backlog of unused permits frequently indicates a likely increase in near-term starts, the rapid rise in both financing costs and construction costs could cause some developers to defer or cancel projects that have yet to break ground.

Negative signs appeared in the past month regarding demand for retail, amusement, and office construction. Bed Bath and Beyond announced it would close 150 stores and FedEx announced plans to shutter 90 locations. Cineworld declared Chapter 11 bankruptcy and closed some Regal Cinemas; other theater chains experienced lower-than-expected sales during the summer “blockbuster” season. “U.S. office vacancy stands at 12.4%, the highest it has been in the pandemic, up from 9.6% in the first quarter of 2020, according to data firm CoStar Group Inc.,” the Wall Street Journal reported on Monday. “In a sign that more companies are trying to reduce office space, 230 million square feet of sublease space currently is available, up from 120 million in the first quarter of 2020 and the highest amount since CoStar began tracking the metric in 2005.” Without a concentration of office workers, more retailers are like to shut their doors. The implication for office construction depends on whether firms move to newer but smaller offices, stay put but add amenities to try to lure more employees back, or subdivide and sublease space.

Total compensation for construction industry employees (salaried and hourly) averaged $43.56 per hour in the second quarter of 2022, the Bureau of Labor Statistics (BLS) reported on Wednesday in the latest Employer Costs for Employee Compensation release. That was 12% more than the average of $38.91 for all private sector employees. Construction industry wages and salaries averaged $30.39 per hour, 11% higher than the all-industry average of $27.44. Construction spending on benefits differed markedly from other industries, averaging $13.16 per hour, 15% more than the all-industry average of $11.47. For construction, the largest benefits cost was for legally required benefits, averaging $4.03 per hour (9.3% of total compensation), which was 38% more than the all-industry average of $2.93 (7.5% of compensation). The second-costliest category of benefits for construction (and costliest for the overall private sector) was insurance, averaging $3.09 per hour (9.5% of compensation), 4% more than the all-industry average of $2.96 (7.6% of compensation). Construction averaged $2.34 per hour (5.4% of compensation) for retirement and savings, 76% more than the all-industry average of $1.33 (3.4% of compensation). Paid leave in construction averaged $1.97 per hour (4.5% of compensation), 31% less than the all-industry average of $2.87 (7.4% of compensation).

“The COVID-19 pandemic’s disruption of labor markets was massive, but it had only a modest impact on peoples’ retirement timing, according to recently released data from the U.S. Census Bureau’s 2021 Survey of Income and Program Participation,” the agency reported on Monday. The sample size was too small to break out construction, but among people employed in January 2020 in agriculture, forestry, mining, construction, transportation, warehousing, or utilities, 2.1% reported in 2021 that they had retired early or planned to do so (compared to 2.9% of all workers), while 1.4% retired later or planned to (compared to 2.3% of all workers).

Dodge, AIA, Census report small changes in starts for December but big increases from 2020


Total construction starts were virtually unchanged from November to December at a seasonally adjusted annual rate, data firm Dodge Construction Network reported on Tuesday. For 2021 as a whole, starts rose 12% from 2020. Residential construction starts gained 4% in December 2021 and 20% for the year, with single-family starts up 3% and 18%, respectively, and multifamily starts up 5% and 25%. Nonresidential building starts rose 3% for the month and 12% for the year. For the month, the “commercial sector advanced 12% due to gains in retail, office, and hotel starts while parking structures lost ground. Institutional starts fell 17% in December as healthcare pulled back following a strong November. Manufacturing starts, meanwhile, posted a significant gain due to the start of a large project.” For the full year, commercial starts rose 8%; institutional starts, 5%; and manufacturing starts, 89%. Nonbuilding starts declined 12% for the month and inched up 0.4% for the year. Within nonbuilding, environmental public works gained 40% and 21%, respectively. Utilities/gas plants fell 79% for the month but rose 6% for the year. Miscellaneous nonbuilding dropped 23% and 16%, respectively. Highway and bridge starts fell by less than 1% in December and 6% for the year.

The Architecture Billings Index (ABI), which the American Institute of Architects calls “a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months,” increased to 52.0 in December from 51.0 in November, the 11th consecutive reading above the breakeven mark of 50 and far above the December 2020 score of 42.3, AIA reported on Wednesday. The ABI is derived from the share of responding architecture firms that report a gain in billings over the previous month less the share reporting a decline in billings, presented on a 0-to-100 scale. Any score above 50 means that firms with increased billings outnumbered firms with decreased billings. Scores by practice specialty (based on three-month moving averages) varied greatly: the score for mixed-practice firms reached the highest level since April 2005, 60.2 (up from 59.2 in November). In contrast, other specialties all slipped below 50: commercial/industrial and multifamily residential, both 49.2 (down from 50.4); and institutional, 47.6 (down from 48.8).

Housing starts (units) climbed 1.4% at a seasonally adjusted annual rate from November to December and 2.5% year-over-year (y/y) from the December 2020 level, the Census Bureau reported on Wednesday. For the year, starts rose 16% from 2020. Single-family starts declined 2.3% for the month and 11% y/y but increased 13% for the year. Multifamily (five or more units) starts increased 14% for the month, 56% y/y, and 22% for the year. Residential permits increased 9.1% from November, 6.5% y/y, and 17% for the year. Single-family permits increased 2.0% for the month and 13% for the year despite an 8.5% decrease y/y. Multifamily permits jumped 46% for the month, 43% y/y, and 26% for the year. The number of authorized multifamily units that have not started—an indicator of potential near-term starts—soared 53% y/y.

Recent reports from the Construction Labor Research Council and construction compensation consultancy PAS provide perspectives on construction compensation trends. “The first year of new union settlements reached during 2021 had an average increase of 3.0%…based on the total package (wages, fringe benefits and other employer payments),” compared to 2.9% in 2020 and 3.0% in 2019, CLRC reported on Tuesday. “Based on already known negotiated increases, past trends, and other relevant factors, CLRC projects a continuation of the slow but steady increase trend in the size of union total package rates as a percentage. Principal factors in union pay rates continue to include covid-19, union craft labor shortages, higher construction costs and the ever-present challenges to union market share.” Among the nine Census regions, the largest increase was in the Northwest (4.0%, down from 4.4% in 2020); the smallest, in the South Central region (2.0%, up from 1.7%). Across 16 crafts, “all but three crafts were within 0.4 percent[age points] of the mean in 2021.” Glaziers were the craft with the largest increase (3.4%, up from 2.3%); the smallest was for ironworkers (2.3%, up from 2.1%). Combining new settlements with the 2021 increase in prior-year settlements, the “average total package increase in 2021for all contract years for union crafts in construction was 2.8%. CLRC projects a relatively flat trend, with a slight uptick of 0.1% through 2023, bringing the percentage increase back to where it was in 2019.”

PAS reported on December 22, “Based on 199 companies in this 18th edition of the Construction Support Staff Salary Survey, excluding 0% projections, contractors are anticipating construction support staff wage increases to average 3.6%. This is down from the 2020 actual increase of 3.8%. When we factor in those contractors who are freezing pay, the projected 2021 increase is 3.5%….In 2021 the percentage of firms improving their benefit programs was 27.1%. The percentage of firms reducing their level of benefits in 2021 was 0.6%. Benefit costs remain at 25%, shown as a percent of base pay.”

Union membership in the construction industry rose by 31,000 (3.1%) from an annual average of 993,000 in 2020 to 1,024,000 in 2021, the Bureau of Labor Statistics reported on Tuesday. However, the 2020 figures reflect a steep decline in employment that affected union and non-unionized firms differently. Union membership in 2019 was 1,055,000. Total construction industry employment averaged 8,157,000 in 2021, a rise of 328,000 (4.2%) from 2020 but still 195,000 (2.3%) below the 2019 average of 8,352,000. As a result, the rate of unionization was nearly flat: 12.6% in 2019 and 2021, 12.7% in 2020. The number of employees represented by unions—including workers who report no union affiliation but whose jobs are covered by a union or an employee association contract—totaled 1,112,000 (13.6% of all construction industry employees) in 2021; 1,050,000 (13.4%) in 2020; and 1,133,000 (13.6%) in 2019.

Robert Hoffman, AIA, Named Managing Principal at Oculus Inc.


Oculus Inc., an award-winning, WBE-certified architecture and interior design firm, has hired Robert A. Hoffman, AIA, as the managing principal for the firm’s Portland office. In his role, Hoffman will oversee the operations, project development and staffing in Portland, as well as focus on growing the firm’s national footprint in the hospitality, multi-family, senior living, retail and commercial office markets.

“What a tremendous advantage to have Robert on board leading and enhancing the capabilities of our talented architects and designers,” said Lisa Bell-Reim, Oculus Inc. president. “Very rarely do we have the opportunity to bring on such a highly experienced executive architect and are thrilled for the opportunities that lie ahead.”

Oculus Inc. entered the Portland hospitality market in 2017 and has since built its practice there and along the west coast as a full-service architectural and interiors design firm. While Oculus now serves all markets from its Portland office, the firm’s West coast presence maintains a heavy concentration in hospitality work. Recently completed projects include the firm’s first out of ground hotel located in Seaside, Ore., and the guest room interiors for the Woodlark Hotel in Portland, which was named a finalist for the International Interior Design Association’s (IIDA) Interior Design Competition.

“Oculus has a demonstrated strength in delivering high profile, unique hospitality environments, so the opportunity to join the firm was an obvious decision for me,” said Hoffman. “I am truly excited to bring our team’s energy and abilities to our clients’ projects!”

Hoffman brings more than 30 years of architectural practice and professional association leadership including business planning and operations, resource management, market strategies, public outreach, communications, and staff development. Prior to joining Oculus Inc., Hoffman most recently served as managing principal for a Portland-based architecture firm, responsible for overseeing and supporting the design-build delivery of projects in the hospitality, entertainment, and residential market sectors.

Hoffman also served as the executive vice president and CEO of American Institute of Architects’ Portland and Oregon Chapters from 2014 to 2019, where he oversaw program development and operations for 1,500 members and industry partners. Hoffman has a Master of Architecture degree from the University of Oregon and received his Bachelor of Science degree in Environmental Design from the College of Design at North Carolina State University.

Oculus Inc. delivers comprehensive architecture, interior design, planning and move management services with a driving aesthetic to Connect | Shape | Move people, experiences, sensibilities, and spaces. Oculus creates high-performance design that supports change and promotes value for clients in the commercial, education, government, healthcare, hospitality, retail, restaurant and workplace industries. Oculus has offices in St. Louis, Dallas and Portland, Ore., is WBE-certified and is regularly cited in top industry rankings for architecture and design.