The nation's construction industry is gradually rebounding from the recession, and El Paso construction spending should grow this year more than the projected 5 percent to 10 percent national growth rate, an economist for the Associated General Contractors of America said in El Paso on Tuesday.
"I am upbeat but not exuberant about the construction industry here," Ken Simonson, chief economist for Associated General Contractors of America, or AGC, said after presenting his national construction industry outlook to local contractors Tuesday at a breakfast.
El Paso's good economy, expected growth in warehousing and other services tied to manufacturing in Mexico, the coming construction of a new hospital at Fort Bliss, and other ongoing public and private projects should boost the El Paso construction industry, Simonson said.
"The big question is what will happen at Fort Bliss," Simonson said. The military is downsizing, and overall federal construction spending is declining due to federal budget cuts, he said.
Construction of the new William Beaumont Army Medical Center, which is to cost $649 million to build under a winning bid by a partnership of two national contractors, should create work for subcontractors and others, Simonson said. However, the project is being delayed pending the outcome of a bid protest by competitors.
Omar Veliz, president of the AGC's El Paso chapter and founder of Veliz Construction, a 3-year-old El Paso general contractor, said he agrees with the AGC economist's positive outlook.
"I think El Paso's construction industry has some bright spots, but also some challenges," Veliz said. A lot of outside companies came to El Paso to work on the now almost-completed multibillion-dollar Fort Bliss post expansion, and that left local companies out, Veliz noted. He doesn't want to see the same happen with the new Army hospital project, Veliz said.
Other projects are coming up, including the Downtown baseball stadium, and construction of clinics for University Medical Center of El Paso, Veliz noted. A further boost could come if the federal government allows public-private partnerships to do international bridge and other border infrastructure projects, he added.
Simonson said the nation's construction industry is "still below levels of the last decade, but is gradually coming back."
Construction accounted for about 5 percent of the nation's economic output at the industry's peak in 2006, and is now down to 3 percent, he said.
Total construction spending nationwide, including housing construction, should grow 5 percent to 10 percent this year and the next four years, Simonson forecast. Total construction spending grew 10 percent last year, he reported.
Private nonresidential construction spending, not including government-funded projects, is projected to grow 10 percent to 15 percent this year, compared with 18 percent last year, Simonson said.
"We are going to have population growth and economic growth (in the next few years), and those are the fundamentals of the construction industry over the long haul," Simonson told his small breakfast audience at the Federal Reserve Bank of Dallas' El Paso branch.
"We'll have upper single-digit growth in (construction) spending (in the next four years), but that will be less than the last decade," he said.
Single-family home construction, office and retail store construction will be less than in the past, Simonson predicted. Public construction funding will be flat to declining during the next several years, he said.
The booming oil and gas industry, and the warehousing industry should be construction growth areas, he said.
Total nonresidential construction spending, including public projects, was $572 billion last year.
Simonson projects costs of construction materials will rise 2 percent to 4 percent this year -- more than last year's 1.3 percent increase, but less than the 5 percent increases in both 2010 and 2011. Construction labor costs are projected to increase 2 percent to 4 percent this year as companies try to lure workers back to the industry, he said. Project bid prices are projected to rise 2 to 5 percent this year, he said.
"A lot of people have left construction (during the recession) either for other jobs, for school, or retirement, or dropped out of the workforce or have went back across the border," Simonson said. "While we still have a high unemployment rate (15.7 percent in February for the construction industry), increasingly we're going to have trouble finding workers."
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