Construction numbers on the rise thanks to education

Education projects are getting high marks from construction businesses in the Baltimore-Towson area.

That’s because the region posted $150.3 million worth of future non-residential construction, up nearly 50 percent this October compared with the same month in 2009, according to McGraw-Hill Construction. And much of that growth has been driven by higher education and K-12 construction projects, as well as some health care.

It’s a bright spot at a time when competition for construction work is still hotly competitive and executives and analysts are still uncertain whether a renewed appetite for building is taking hold.

“Institutional as a whole, which includes health care and transportation buildings, is up. But it’s because of education, that that category has seen a 24 percent increase overall this year compared to previous years,” said Kim Kennedy, manager of forecasting for McGraw-Hill Construction Research & Analytics.

Future residential construction was also up 40 percent in October compared with October 2009, posting $70.7 million worth of projects. For the year, however, non-residential projects are down 3 percent compared with 2009 and residential is up 22 percent.

The Washington, D.C. market didn’t fare as well in October, with $359.9 million worth of future non-residential construction projects, up 16 percent from the previous October. Future residential projects came in at $189.4 million, down 3 percent. Non-residential construction is down 24 percent to $3.8 billion for the year compared with 2009, but residential is up 3 percent to $2.1 billion.

Analysts say the whole year has been a roller coaster ride nationally, with some months posting large increases and others looking down.

“Generally what we’ve been seeing over the course of the year is fluctuations,” said Ken Simonson, chief economist for the Associated General Contractors of America. “For instance, the October figure is higher than September, August or July but lower than previous months.”

National total construction spending increased 0.7 percent in October, driven by power projects and public construction, according to the Associated General Contractors of America. The weakest categories were private non-residential and single family construction.

Some of the local education and research facility projects that pushed up construction numbers in Maryland include the $229 million U.S. Army Medical Research Institute of Chemical Defense, which is at the Aberdeen Proving Ground. The University of Baltimore’s law school is working on the John and Frances Angelos Law Center, a $107 million building that will open in 2013. The University of Maryland, Baltimore County’s $65 million performing arts and humanities facility also gave a boost to the construction numbers, along with $70 million in renovations and additions to Northeast High School in Pasadena.

Construction companies, however, are guarded when it comes to the health of their industry. While projects are moving along, the environment is still highly competitive and a long ways from full recovery.

Gilbane Inc., a building company in Providence, R.I., that has offices in Baltimore and Washington, predicts revenue will be flat this year despite work on several higher education projects at Frostburg State University and Coppin State University. The company is also working on the $100 million physical sciences facility at the University of Maryland.

“Basically it’s a very competitive marketplace,” said Paul Choquette, regional business development manager at Gilbane. “The opportunities are there but they are not nearly as robust as they have been.”

There’s also some concern in education that the sector could lose some ground next year as tax receipts dip down, giving local governments less money to build schools.

“In institutional, Baltimore has been doing well but really that’s one market I’m worried about because of what happens on the public funding side,” Kennedy said. “When fiscal conditions are soft, that could lead to softer conditions for education.”

Analysts expect most construction categories to be on the mend, with commercial buildings pulling up the rear. The growth in office space will be driven by employment figures going up, which will push companies to eventually expand their square footage. Choquette says growth will be partly driven by banks being willing to lend money again.

“By mid-year, the credit requirements will continue to loosen and deals will happen,” he said. “I do feel like in the summer of next year, things will be moving at a rapid pace.”

One comment

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