Non-residential construction going strong
While the residential building sector endures a much-publicized cooling-off period, various sources point to strength in non-residential construction, reports Ken Simonson of Associated General Contractors of America.
In late July the Federal Reserve’s Beige Book reported that “Commercial construction activity was at high levels and increased further in the Dallas, Atlanta, and Richmond districts. By contrast, Chicago reported a modest slowdown in commercial construction activity, and Kansas City noted that ‘commercial real estate activity was mostly flat.’
Builders in some areas faced moderate constraints on construction activity.
“High construction costs reportedly were a restraining factor that delayed or caused the cancellation of some building projects in the Cleveland, Chicago, and San Francisco districts. Moreover, Atlanta reported that some commercial building projects along the Gulf Coast have been put on hold until late fall, after the current hurricane season is over.”
McGraw-Hill Construction reported that its count of new construction starts in June dropped 5 percent from May, but total construction for the first half of 2006 was up 7 percent from 2005, with non-residential building 17 percent higher.
Also, the Bureau of Economic Analysis reported that one of the few categories of output to accelerate was real investment in private non-residential structures, which increased 11.7 percent in the second quarter vs. 8.7 percent in the first.
Structural steel industry moves to ensure supply meets demand
Rapidly increasing demand for structural steel has led some suppliers to initiate a controlled order entry process to ensure that customers have an adequate supply of steel for the projects they are working on. With controlled order entry, rather than selling steel on a first-come, first-served basis that could allow a small number of buyers to corner the market on all available steel, customers purchase steel on the basis of how much they purchased in the past.
“We can talk to our customers and find out the real need versus the speculative or hedge-buying need,” says Joe Stratman of Nucor-Yamato Steel Company in Blytheville, Ark.
According to Stratman, as the market strengthened beginning late last year, rolling cycles began expanding. “As the cycles started expanding, people felt they needed to get out ahead of the market,” he says. “They’ll start buying further and further out. It originally grows by legitimate demand, but it expands by speculative buying.”
Nucor-Yamato’s response was to discuss needs with its customers and when required to limit purchases based on previous levels of demand from a specific customer. For fabricators that buy primarily from mills, the controlled order entry system is largely viewed as a positive.
California Title 24 recognizes white’s energy efficiency
According to the White Coatings Council of the Roof Coatings Manufacturers Association, recent legislation in California underscores the merits of using white coatings on commercial buildings to reduce energy costs.
“California Title 24 legislation is exemplary for its support of white coatings,” says Thomas Meyer of the WCC. “Exempting buildings with high reflectance roofing from energy audits is fitting and proper because white coatings dramatically decrease the need for insulation and air conditioning.”
Steve Heinje of the WCC says that alleviating solar heating loads directly affects peak electricity requirements. “Peak electric loads are often the basis for the price of electricity, because they establish the energy generating needs of a region,” he says. “This pioneering legislation sends a strong message to building designers: The best way to cool a building is to divert the solar energy before it raises temperatures.”
Title 24 requires a detailed energy audit on a new building to show that solar heat is dissipated or removed in an energy efficient manner, i.e. through insulation and climate control systems, unless the building uses highly reflective roofing with reflectance values above 0.70.
Bush limits eminent domain
President Bush issued an executive order in June barring federal agencies from seizing public property through eminent domain, except for public works projects.
Local governments received increased powers to seize private property after the Kelo v. City of New London ruling handed down by the Supreme Court last year (September 2005 Rural Builder). Bush signed his order on the first anniversary of the Kelo decision, which was widely criticized. In November, the House of Representatives overwhelmingly passed a bill to cut federal economic development aid to states and localities for two years if they use eminent domain.
Housing starts decline
Total housing starts dropped 5.3 percent in June to a seasonally adjusted annual rate of 1.85 million units, according to figures released by the Commerce Department. This was 11 percent below the pace of a year ago.
Single-family housing starts were down 6.5 percent for the month to a pace of 1.486 million units, a 13.8 percent drop from the June 2005 pace. Multifamily housing construction was up 0.3 percent for the month to a seasonally adjusted pace of 364,000 units.
“NAHB’s surveys of single-family builders have been showing a steady decline in confidence since the middle of last year, and builders are acting accordingly,” says David Pressly, president of the National Association of Home Builders.