Construction Market Eyes Increase in 2010
— Dec 01, 2009
McGraw-Hill Construction’s recently released 2010 Construction Outlook forecasts an increase in overall U.S. construction starts for next year. Due to improvement for housing from extremely low levels and broader expansion for public works, the level of construction starts in 2010 is expected to climb 11 percent to $466.2 billion, following the 25 percent decline predicted for 2009.
“The U.S. construction market in 2010 will be helped by growth for several sectors, following three straight years of decline that brought total construction activity down 39 percent from its mid-decade peak,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, addressing more than 300 construction executives and professionals at the 71st annual Outlook 2010 Executive Conference in Washington Oct. 16. “The benefits from the stimulus act will broaden in scope, lifting not just highway construction but also environmental public works and several institutional structure types. With continued improvement expected for single family housing, after reaching bottom earlier this year, the overall level of construction activity should see moderate expansion in 2010.”
Highlights of the 2010 Construction Outlook include:
Single family housing for 2010 will advance 32 percent in dollars, corresponding to a 30 percent increase in the number of units to 560,000 (McGraw-Hill Construction basis).
Multifamily housing will improve 16 percent in dollars and 14 percent in units, after steep reductions in 2008 and 2009.
Commercial buildings will drop 4 percent in dollars, following a steep 43 percent drop in 2009. The weak employment picture will further depress occupancies, making it even more difficult to justify new construction.
Institutional buildings will begin to stabilize after losing momentum in 2009. Square footage will retreat another 2 percent after sliding 23 percent this year. The dollar amount of construction for this sector will edge up 1 percent, helped by a growing amount of energy-efficiency upgrades to federal buildings and continued strength for military buildings.
Manufacturing buildings will drop 14 percent in dollars and 3 percent in square feet, hampered by the substantial amount of slack manufacturing capacity.
Public works construction is expected to rise 14 percent, given more wide-ranging strength across all project types.
Electric utility construction will slip 3 percent, continuing to settle back after a record high in 2008.
The 2010 Construction Outlook was presented at the McGraw-Hill Construction Outlook Executive Conference in Washington, D.C., which brought together top management from all parts of the construction industry, including firms involved in building product manufacturing, architecture and design, contracting, engineering, industry associations and others. At the event, Frank Giunta of Hill International and George Pierson of Parsons Brinckerhoff offered insights to an industry emerging from the crisis.
“The stimulus funds are meant to be just that, a stimulus, not the be-all, end-all answer to infrastructure financing,” said Giunta, senior vice president and managing director of Hill International. “Both public and private sectors need to be innovative and rewrite the rules of project finance to address tremendous construction needs with minimal financing options.”
“The efforts of the federal agencies at transparency and their willingness to engage with private industry is refreshing,” said Pierson, chief operating officer, Parsons Brinckerhoff. “We have to work together to meet the challenges of infrastructure and this economy.”
M&A Activity in the Water Sector
Three recent mergers in the water/wastewater sector may show that the market is ripe for mergers and acquisition. The market has long been fragmented with relatively small regional firms comprising the bulk of the market.
The recent moves include Layne Christensen’s acquisition of W.L. Hailey & Co. Inc. The acquisition purchase price was $15 million. W.L. Hailey, founded in 1925 in Nashville, Tenn., is a leading provider of water and wastewater infrastructure solutions in the Southeast and is ranked among the largest environmental construction firms in the United States. W.L. Hailey adds to the list of acquisitions made recently to expand Layne Christensen’s geographic coverage in its water infrastructure business. W.L. Hailey will be added to Layne’s heavy/civil construction arm with approximately $80 million and $5 million in trailing 12-month revenues and earnings before interest and taxes, respectively.
Layne Christensen’s Water Infrastructure Division includes Reynolds Inc., which provides design and construction services for treatment plants, pump stations and pipelines, and Reynolds Inliner, an industry leader in cured-in-place pipeline renewal.
In another move involving companies active in sewer rehab, Detroit, Mich.-based Inland Pipe Rehabilitation (IPR), a leading provider of underground rehabilitation solutions with offices throughout the United States, has acquired Improved Technologies Group LLC (ITG), a Knoxville, Tenn.-headquartered sewer rehabilitation company.
The addition of ITG to the IPR family of companies will strengthen the company’s Southeastern regional presence, while also supplementing IPR’s rapidly evolving roster of underground rehabilitation solutions. The addition of ITG, combined with IPR’s existing Underground Technologies business in Knoxville, Tenn., Inland Waters Pollution Control in Atlanta, Ga., and PM Construction business in Jacksonville, Fla., allows IPR to offer more underground technologies and coverage areas than any other company in the Southeast.
IPR has expanded its solution offerings and locations dramatically since 2006 through the acquisitions of Ontario, Calif.-based RePipe and Houston, Texas-based PM Construction, both of which now operate as affiliates of IPR.
Lastly, Logistec Corp., through its subsidiary Sanexen Environmental Services Inc., has acquired the Niedner business for cash consideration of $13.4 million (U.S.). For the past 10 years, Niedner, a leading North American fire-hose manufacturer, has been the exclusive supplier to Sanexen of one crucial component of Aqua-Pipe, the structural lining developed by Sanexen used to rehabilitate watermains. Niedner benefits from its capacity to produce large diameter hoses, as well as a research and development team, both being unique in North America.
Niedner will become a wholly-owned subsidiary of Sanexen and, with this acquisition, Sanexen pursues its mission to become a leader in the watermain rehabilitation market.
