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Southeast's Slow-Motion Construction Recovery Set to Fast-Forward

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Southeast contractors have lamented the frustratingly slow pace of the region’s spotty construction recovery for so long that some might have started to believe that a broader rebound was just so much wishful thinking.

Image courtesy Atlanta Braves
One major project slated to start construction in 2014 is the Atlanta Braves' new ballpark in Cobb County, Ga., which will also feature a $400-million mixed-use development that will be incorporated into the site.
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Well, those contractors can think again.

For the first time in several years, McGraw Hill Construction is forecasting that the Southeast region's contract activity will achieve an across-the-board increase within each of its broad construction categories: nonresidential, residential and nonbuilding. Importantly, these regional construction markets will be accelerating significantly, as the company expects a 22% overall gain in the cumulative value of newly signed construction contracts for the states of Florida, Georgia, North Carolina and South Carolina during the coming year. By comparison, the company's national forecast predicts a 9% overall gain in the value of new contracts.

Altogether, that should add up to an estimated $88.7 billion in new contracts during 2014, says McGraw Hill, or nearly $16 billion higher than 2013's expected total. Additionally, 2014’s accelerated pace of contracting will be felt across the entire Southeast region, with overall percentage gains for the individual four states ranging from a low of 17% in North Carolina, to the 45% increase expected for South Carolina.

Arguably most notable among McGraw Hill’s forecast numbers are those for the nonresidential category. Indeed, after bouncing along at an annual volume of about $19 billion for the past four years—ranging from between $18.8 billion and $19.2 billion during 2010-2013—the Southeast’s nonresidential market should generate nearly $24 billion in new contracts during 2014, according to McGraw Hill. That’s enough for a 26% annual gain compared to 2013’s estimate, and the highest dollar amount for this category since 2008.

Looking further into this category’s prospective resurgence, all three nonresidential subcategories—commercial, industrial and institutional—are expected to move up in 2014. The value of commercial contracts, for instance, is forecast to jump 36% during the coming year, generating roughly $10.4 billion in new work. The other major nonresidential sector, institutional, could deliver nearly $11.4 billion in 2014 contracts, for a 21% improvement over 2013.

While nonresidential’s wake-up call is significant, residential will continue to drive the most overall activity. Across the four-state region, 2014 housing contracts should tally nearly $51.6 billion—this category’s highest total since 2007—for a 22% overall increase. That comes on the heels of McGraw Hill’s estimated 35% overall gain in 2013.

Multifamily developments will continue to proliferate across the region, with this sector expected to grow by 19% compared to ’13, delivering more than $8.6 billion in new work. The volume of single-family housing contracts will increase at a greater rate, 23%, for an expected $42.9-billion 2014 total.

Infrastructure work, as noted in McGraw Hill’s nonbuilding category, should rise by 13% overall, for a nearly $13.2-billion overall total. A chart displaying McGraw Hill Construction Dodge's forecast for the four-state Southeast region is included below, followed by a state-by-state breakdown.

McGraw Hill Construction Dodge Southeast Construction Starts
 Millions of DollarsAnnual Percent Change
 2013 Forecast2014 Forecast20132014
Residential
   Single Family Housing34,89542,91435%23%
   Multi Family Housing7,2438,64436%19%
Total Residential42,13851,55735%22%
 
Nonresidential
   Commercial7,65510,4207%36%
   Industrial1,9532,2111%13%
   Institutional9,38411,367-3%21%
Total Nonresidential18,99323,9981%26%
 
Nonbuilding
   Public Works10,59311,2830%7%
   Utilities1,0541,875-95%78%
Total Nonbuilding11,64713,159-61%13%
 
TOTAL CONSTRUCTION72,77888,714-9%22%
 
McGraw Hill Construction’s Southeast region includes Florida, Georgia, North Carolina and South Carolina
Source: McGraw-Hill Construction Dodge

 

Florida
2014 Forecast: $40.4 billion
2013 Forecast: $33.6 billion
Percent Change: +20%

The Sunshine State and its overbuilt housing sector provided a national symbol of the Great Recession. More recently, the state—and Miami in particular—has earned attention for a construction resurgence built partly upon another condominium boom.
According to McGraw Hill, Florida is poised to put considerably more distance between itself and its latest bust period, with a 20% jump in activity expected during the coming year. That would equate to nearly $40.4 billion in new contracts, up from 2013’s estimated $33.6-billion total—and the Sunshine State’s largest overall contracts total since 2007.

Not surprisingly, residential will generate most of Florida’s new construction contracts in the coming year. According to McGraw Hill, roughly $25.8 billion worth of residential contracts will move ahead in ‘14—or about half of the Southeast’s $51.6-billion estimate.

Overall, the company estimates that 2014 single-family contracts will rise 28% to $21.8 billion, which would be the state’s highest tally for this category since 2006. Estimated to rise 14% compared to 2013, multifamily contracts could total just over $4 billion.

Florida’s nonbuilding category—which includes public works and utilities—will be flat in 2014, again generating around $5.5 billion in new contracts. (Notably, of all four states, Florida’s nonbuilding sector is the sole broad category that is not positive.)

Georgia
2014 Forecast
: $17.9 billion
2013 Forecast: $15.2 billion
Percent Change: +18%

When it comes to generating construction-based national news, no Southeast state currently comes close to matching Georgia. With the $1.2-billion Atlanta Falcons stadium project already moving forward, the Braves shocked baseball fans and local citizens alike in early November when the team announced a previously secret deal with nearby Cobb County to build a new, $672-million ballpark north of town. A few days later, the Major League Baseball team announced that it would also build a $400-million mixed-use development around the proposed stadium site.

With both the Falcons and Braves stadium projects currently scheduled to kick off construction in 2014, there’s considerably more for Atlanta-area contractors to cheer about than there had been.

The latest news has at least tweaked the tune of Bill Anderson, president of Associated Builders and Contractors of Georgia. In an earlier forecast story, published in November, Anderson lamented Atlanta’s “slow recovery."

"We expect this steady but minor increase to continue throughout 2014,” Anderson said at the time, adding: “The industry’s overall direction is definitely improving, but certainly not at the pace many are accustomed to after a downturn."

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