Honolulu s Construction Industry: Where is it Going? Presented for the Society for Marketing Professional Services

Transcription

1 Honolulu s Construction Industry: Where is it Going? Presented for the Society for Marketing Professional Services

2 Introduction Introduction of Rider Levett Bucknall National View Local View Quarterly Cost Reports (QCR) What Influences Construction Costs? 2015 and Beyond Introduction

3 History Rider Levett Bucknall employs over 3,500 staff in more than 150 offices worldwide Introduction

4 INSERT JAYSON S CHART Introduction

5 Military Housing Photo Park Lane Ala Moana Introduction HGV Grand Islander Kapi olani Medical Center for Women & Children NICU / PICU Phase II

6 Kamehameha Schools Hawaii Campus DOTA ARFF Training Facility Hilton Waikoloa Kings Land Phase II Introduction Univ. of Hawaii at Hilo Bookstore

7 RLB Worldwide Locations Introduction

8 AMERICAS CANADA CARIBBEAN USA Austin, TX Boston, MA Chicago, IL Denver, CO Hagåtña, GU Hilo, HI Honolulu, HI Kennewick, WA Las Vegas, NV Los Angeles, CA Kihei, HI New York, NY Orlando, FL Phoenix, AZ Portland, OR San Francisco, CA Seattle, WA Tucson, AZ Waikoloa, HI Washington, DC About Us

9 National View National View

10 National View Monthly Change in Construction Employment, January 2012 November 2015 Monthly Change in Employment Seasonally adjusted, in thousands Source: U.S. Bureau of Labor Statistics National View

11 National View U.S. Construction Put in Place, Seasonally Adjusted (Billions) * RLB Estimate Source: US. Census Bureau *RLB Estimate for 2015 National View

12 Construction Activity Cycle National View National View

13 Local View Local View

14 Honolulu View Honolulu vs. National Average Bid Prices, Source: Rider Levett Bucknall Local View

15 Hawaii Economic Indicators Source: UHERO Local View Figures for are forecasts

16 Hawaii Population Current population of Hawaii and growth rate: 2010 Census: 1,360, (estimated): 1,408, (estimated): 1,419,561 Growth Rate of 0.8% From 2010 to 2014, population grew by 4.4% 70% of the total population lives in the City & County of Honolulu Greatest population growth on the Big Island (24.5%, ) Source: Hawaii.gov DBEDT Research & Economic Analysis Division Local View

17 Hawaii Employment Unemployment rate decreased from 2014 to 2015 in all counties across the State of Hawaii. Unemployment % Change Honolulu County 4.6% 4.1% -0.5% Hawaii County 6.5% 5.5% -1.0% Maui County 5.1% 4.4% -0.7% Kauai County 5.3% 4.8% -0.5% Source: Hawaii.gov DBEDT Research & Economic Analysis Division Local View

18 Hawaii Construction Industry Construction has been one of the major contributors to job growth in Hawaii over the past few years Construction sector added 1,700 jobs in the third quarter of 2015 (compared to same quarter of 2014) Indicators of Hawaii s construction industry were all positive in 3rd Quarter of 2015: Private building authorizations, construction jobs, government contracts awarded, but State CIP expenditures decreased in this quarter Local View

19 Hawaii Construction Industry Before the recession (specifically ), construction job growth averaged 8.0% per year; in 2007, the average number of construction jobs reached a peak of 40,000 jobs. As of the 3 rd quarter, 2015, there are 34,200 construction jobs. The strength of the current construction job market is in sharp contrast to the recession period, (from ) where quarter-overquarter construction job growth was negative. Source: Hawaii.gov DBEDT Research & Economic Analysis Division Local View

20 Hawaii Construction Growth rates in total private building permits were positive in all counties, with major increase in Maui County. Source: Hawaii.gov DBEDT Research & Economic Analysis Division Local View

21 Hawaii Construction Industry Last year s construction gains were smaller than anticipated. Activity will continue to increase this year, as Kakaako condo building intensifies and new tourism-related projects add to the mix. The more attenuated schedule of rail building and lagging single-family developments will generate a lower and later peak to the current construction cycle. Source: UHERO, Hawaii Construction Forecast, 3/27/15 Local View

22 Hawaii Construction Source: UHERO, Hawaii Construction Forecast, 3/27/15 Local View

23 Hawaii Construction Source: UHERO Data Portal ( Rider Levett Bucknall Quarterly Construction Cost Report ( Local View

24 What is the Quarterly Cost Report (QCR)? Comparative cost of construction in 12 U.S. cities, indexing them to show how costs are changing in each city in particular, and against the costs in the other 11 locations. You ll be able to find this information on the Comparative Cost Index and Cost & Change Summary. What is the QCR?

25 Quarterly Cost Reports What is the QCR?

26 Cost & Change Summary What is the QCR?

27 New York Honolulu Las Vegas What is the QCR?

28 Cost escalation in Honolulu in the 2 nd Quarter hit 2.76% (11.0% annualized) leading its construction costs to eclipse those of New York City and making it the most expensive city to build in the USA. What is the QCR?

29 What is the QCR?

30 (Continued) What is the QCR?

31 What is the QCR?

32 Total Construction Cost Inputs Labor Materials Equipment Including operations and maintenance costs Subcontractors Bonds Insurance Taxes General Contractor Overhead and Profit About Construction Costs

33 Total Construction Cost Inputs And the Most Overlooked Factor What the Market Will Bear: Supply vs. Demand About Construction Costs

34 Economics 101 P D1 D2 S P2 P1 Q1Q2 Q About Construction Costs

35 About Construction Costs Types of Indexes Labor & Material (ENR) Buy / Sell (RLB) Engineering News-Record December 3, 2012 About Construction Costs Rider Levett Bucknall th Quarter Report

36 Predicting Escalation About Construction Costs

37 About Construction Costs Rates of Inflation Sources: Rider Levett Bucknall, Engineering News-Record, U.S. Bureau of Labor Statistics * ENR BCI and CPI Indexes recalibrated so Base = 100 at April 2001 About Construction Costs

38 (Projections in 2012) About Construction Costs

39 Labor Construction Employment, Source: U.S. Bureau of Labor Statistics About Construction Costs

40 Labor Cost Trends ENR s Skilled Labor Cost Index Source: Engineering News-Record About Construction Costs

41 Labor Cost Trends About Construction Costs

42 Constraints & Materials Glazing Factories around the world have extended production times or simply stopped taking orders Shipping: o West Coast slow downs o Tianjin Port Explosion o Local Customs o Greater quantity of materials Many manufacturers closed during recession, which will put added pressure on materials when national construction demand peaks. About Construction Costs

43 Rising Utility Costs Surge of photovoltaic expected to continue as electrical costs rise With billions to be spent on our sewer system, expect sewer costs to continue increasing Current low oil prices have kept down shipping cost increases; however, historically oil prices will increase About Construction Costs

44 Identification of Risks Entitlement Utilities (partially sewer) Traffic studies Environmental constraints more stringent Archeological Rising construction costs: Maintaining levels of competition Locking in prices Alternative materials About Construction Costs

45 Architectural Billings Index The Future Source: The American Institute of Architects, The Future

46 THE GOOD The Future RLB survey indicates that construction industry on road to recovery in major cities. Consultant PSMJ declares the recession in the A/E/C industry to be officially over. Good industry growth expected through Interest rates to remain low. Housing continues to recover. Pace expected to pick up, especially now that unemployment has dropped below 7%. The Future

47 THE NOT SO GOOD The Future Industry survivors continue to hang on, with some trades doing well and others only now bringing up their fees. Capacity in some trades is becoming a problem and has led to upward price pressure. Despite temporary setback, commodities will face ongoing price pressure driven by recovery in global demand and scarcity. The Future

48 EVERYTHING ELSE The Future Watch exchange rate of US$. Watch consumer spending and consumer confidence. Concern that overseas economic issues may negatively impact US economy. Expect further bid prices to spike at activity tipping point labor and materials prices continue to rise with increasing greater pressure on both. The Future

49 The Future - Inflation Construction Cost Source: Rider Levett Bucknall The Future

50 Thank You