Construction Outlook From Our Market Experts

  • Nov 17, 2016

The Biannual Beck Group Cost Report is out. Preconstruction Directors in each of our markets had an opportunity to weigh on the outlook for construction in each of the markets where we work. Here are their thoughts:


There is no doubt that the construction of the Braves and Falcons stadiums have taken up a lot of manpower over the last two years. As the projects finish up in Q1 and Q2 respectively, what will be the effect on the labor market? A steel subcontractor let us know,

“I think temporarily we will have an influx of labor that might drive some erection pricing down just to keep people busy, but then things will balance out and labor will follow the work.”

And this from a drywall subcontractor,

“As the stadiums wind down, there appear to be significant projects starting in Q2 and Q3 to take up any surplus labor. We are not anticipating a reduction in labor prices. We think they should be stable to slightly up over the next six months.”

As labor has been tight, we are seeing that subcontractors just cannot reach the productivity that they historically have been able to achieve, due to both a decrease in manpower and a reduction in the quality of the tradespeople. Projects that could be done in 12 months five years ago are now taking 14-15 months.

Regarding material pricing, recent subcontractor forecasting shows an increase of 3 to 5 percent in drywall, HVAC, and electrical at the beginning of the year. We have already received an announcement for a concrete increase of $10/cy beginning April 1, 2017. Steel prices look to remain pretty flat.


The Austin market continues to be robust. Even as construction is being completed on office buildings, hotels and The University of Texas at Austin Dell Medical School, new projects are being announced regularly and many clients are budgeting and preparing for future growth. Tower cranes dot the landscape and new projects are in planning. The Houston market continues its transition from the slowdown due to oil prices. Some subcontractors are busy while others are looking for work. Schools, retail, healthcare and manufacturing markets are still good. Corporate and office construction has slowed down, but projects are beginning to show up on the radar as financing and leasing efforts increase. In both markets, material prices are trending up. However, in Austin the most pressing issue pertains to the lack of skilled labor. As was also the case in our previous Cost Report, this is an industry-wide problem that will affect most of our projects in the future.


The most popular saying about the real estate market in Dallas/Fort Worth is that we are in the ninth inning of an extra inning baseball game. Corporate relocations are still the catalyst for design and construction growth, but there is a feeling that these are slowing down. ULI recently held their Fall Meeting in Dallas and that sentiment was reported by Steve Brown, Real Estate Editor, of The Dallas Morning News. To quote the article:

“There is maybe a little more caution in the market,” Andrew Warren, head of research for PriceWaterhouseCoopers said. “The market may be taking a breather. People still feel like 2017 will be another good year for transaction volumes – maybe a little less activity and fewer buyers showing up at the table. The last couple of years there was opportunism in the market, but everyone is also looking forward.”

Some of the worries for the development business Warren red flagged include rising construction costs, the potential for higher finance costs and affordability concerns for the housing markets in many U.S. cities – including Dallas.

Commercial property transaction totals – which in 2015 were the highest since the Great Recession – are expected to decline slightly this year and more in 2017 and 2018, according to a ULI forecast. Total commercial real estate transaction volumes are forecast to fall by almost $50 billion in the next two years, according to ULI’s latest member survey.

In Dallas, qualified design and construction teams, subcontractors and suppliers remain in high demand. We previously reported that most subcontractors have more bidding opportunities than they can staff and that opinion has not changed.


The Denver economy continues to experience a robust construction market. The Colorado economy is outpacing the nation in economic growth, ranking fifth in the nation, with the pace of employment growth ranking third in the nation. In addition to the economic growth, Colorado is experiencing a population boom with 7,000 to 8,000 people moving to the state each month.

The multifamily construction boom continues to thrive and is expected to continue through 2018 before declining in 2019. There were 20,000 units completed in 2015 and another 25,000 units are in various stages of planning, design and construction. Forecasts project 13,750 multifamily permits will be issued in 2016. Beck is currently building a 274-unit high-rise luxury apartment building in downtown Denver, designed by Beck Architecture. This is projected to be completed in the first quarter of 2017.

Nonresidential building is tracking for an increase of 5 percent in 2016. The office market has increased steadily for the last two years. Several large projects are on the horizon that will carry a strong construction trend into 2019. The reduction in oil prices has impacted the available office space in the Central Business District with increased vacancies. Beck is currently building a 23-story Class A office building in downtown Denver, designed by Beck Architecture. The building is over 50 percent leased.

The shortage of construction workers continues with the demand outweighing the supply. Colorado is projected to see an increase of 5.8 percent in construction employment in 2016. The subcontractor community continues to be impacted by the lack of skilled workers. This has had a direct impact on construction projects increasing costs and lengthening schedules. Cost escalation is tracking at 1 to 1-1/2 percent per quarter in 2016.


The election is over and the outlook from Florida looks pretty bright. The expectation is that the state could see investment in infrastructure as a result. Look for more investment in airports and roads. It is not farfetched to see some type of revival of the train between Orlando and Tampa. Rail is successfully coming on line on the East Coast of Florida from Miami to Orlando. It is a logical next step to take it to the West Coast and Federal funding is a must. The elimination of incentives for private corporations to move to Florida has all but closed the doors for Enterprise Florida (the state Economic Development Organization). The reduction in incentives will make Florida less competitive with other southern states like Alabama, Mississippi and South Carolina, but Florida has a great advantage of no state income tax and our weather is attractive to the Northeastern and Midwestern corporations that want to relocate.

All market sectors including office, retail, hospitality and industrial are experiencing slow but steady tightening. Industrial is leading the way and new distribution centers continue to be built on the I-4 Corridor. Retail is steady and continues to fill in where the new housing developments are on a rebound in the suburbs. Hospitality is hit and miss depending on the market. Lenders are tightening on hospitality for fear of overbuilding in a similar way that multifamily is tightening. Office is poised to pick up in all markets. However, there is still the issue of not being able to build a “spec” office building due to bank requirements. The office sector for Class A space is very tight and there is no large contiguous space available for potential relocations or for major consolidations. New construction costs are driving potential rent rates into the mid ’s for Class A space and there continues to be a psychological barrier to rising office rent rates.

Construction for the short term looks strong, but the labor market continues to be very challenging. There is more work than there are qualified subcontractors. There are also larger construction firms moving into the market because of the leading economic indicators. Higher Education spending and Healthcare construction spending have fueled the growth. Healthcare spending may taper until the final plans for Obamacare are decided. More people will continue to move to Florida and the need for good healthcare will drive spending either to adapt to the new system or renovate the facilities built under older systems and consolidation.


The construction sector is a key component of the Mexican Economy. From 2015 to 2016 the construction industry in Mexico grew 3.1 percent according to the Mexican Construction Industry Chamber.

The Office and Retail Sectors report more than 3,900,000 SF (360,000 m2) of construction in progress. Likewise, private investments have increased 8.6 percent compared to 2015 figures, which represent more than 10,000,000 SF of Mixed Use and Residential construction projects.

Mexico’s construction industry for 2017 is expected to show positive movement, with a growing population and urban development in key cities across the country such as Mexico City, Monterrey, State of Mexico and Veracruz, among others. We expect significant future growth in Residential and Mixed-Use markets.