Construction is picking up, projected to grow

2014-04-13T01:00:00Z 2014-04-14T08:41:07Z Construction is picking up, projected to growJoseph S. Pete joseph.pete@nwi.com, (219) 933-3316 nwitimes.com

U.S. construction recently hit its highest point in five years, and was up 9.3 percent in January as the sector rebounds at a faster pace.

Non-residential construction is expected to grow by 5.8 percent this year as hotels and retail chains expand, according to the American Institute of Architects. Such a surge would be a boon for steelmakers, who have struggled because of the sluggish demand from the construction industry.

But construction is rebounding, as companies are moving forward with expansion projects that had put off for years, said Ross Pangere, president of Portage-based construction firm The Ross Group. Projects being put out to bid locally are up by about 30 percent so far this year.

Many manufacturers in Northwest Indiana and the greater Chicago area are growing after seeing increases in sales and demand, Pangere said. They also are able to get financing to add new production lines, or add onto their buildings.

"There's pent-up demand," he said. "It's gradually getting better, but at a faster pace than in the past."

The Ross Group has a backlog on projects that it about 40 percent higher than it was about the same time last year. Companies also want to rush projects, asking to complete nine- or 10-month projects in six or seven months, Pangere said.

"It seems as though clients are in a fast-track mode," he said. "I haven't seen anything like it before."

Commercial and industrial construction spending are expected to increase by 10.3 percent this year, and 10.8 percent in 2015, according to the American Institute of Architects. Industrial construction is projected to rise by 7.8 percent in 2014, while hotels will post the biggest gain, growing at a rate of 13.1 percent.

"Since the overall economy is stabilizing, there should be a significant improvement in the outlook for the construction industry that has been recovering at a slow and steady pace the last two years,” said AIA chief economist Kermit Baker. "At a more granular level, the surging housing market, growing commercial property values and declining office and retail vacancies are all contributing to what is expected to amount to a much greater spending on nonresidential building projects."

The Architectural Billings Index, a leading gauge of how much construction is taking place nationally, rose to 50.4 in January, up from 48.5 percent in December. Any score over 50 indicates an increase in billings.

An improvement in nonresidential construction is vital for steelmakers, since it accounts for 40 percent of the overall market for steel, said New York City-based steel industry analyst Charles Bradford. Automotive sales and appliance sales have been strong, but it is not enough to offset the weak construction because it accounts for such a huge chunk of the overall end market for steel products.

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