Growth in the construction industry is “building” and expected to continue through 2017.
Construction starts were up in 2014, driven largely by the office and industrial sectors in energy-producing markets, as well as traditional office markets like New York. Even as demand explodes, though, the cost to build is higher than ever thanks to the continued increase in labor and materials costs.
Demand for large retail space has declined as more consumers shop online. Much of the growth in the industrial sector, in fact, is to meet growing demand for shipping and warehousing space.
The Construction Backlog Index is high, indicating that 2015 will be a big year. Industry unemployment rates remain high, so there is large potential employment pool. However, skilled labor is lacking, so employers will either need to invest in training or higher wages for the more qualified. We expect materials costs to drop, somewhat offsetting labor costs.
Due to dropping oil prices, one sector that will see a construction decline in 2015 is energy. This will greatly impact Houston in particular, as it was a hub of construction activity last year.
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