Friday, 30 September 2011

Several NC bridges may soon be replaced

North Carolina’s Department of Transportation plans to commit $450 million over the next three years to replace 187 state-funded bridges in 40 counties, and it wants to hire private engineering firms from across the state to help design the projects, the Triangle Business Journal reports

Many of the projects focus on replacing bridges that are less than 20 feet long and can’t qualify for federal funding.

Starting October 3, pre-qualified engineering firms can begin submitting proposals to work on the projects through the N.C. DOT website. A portion of the projects will be designated for bid by smaller design firms, according to Gov. Beverly Perdue’s office. The projects are being advertised on DOT's web site.

"Workers are needed to do design and construction, and dthese projects improve our ability to move people and goods efficiently, expanding our enconomy," the Governor says.

Greer Beaty, spokeswoman for N.C. DOT, says the department has a new goal of outsourcing more of its design work that previously was done inhouse. “Our goal is, if we put this design work out now, we’ll get more competition, we’ll get better pricing and good turnaround,” she says.

Beaty estimates that about $1.5 million of the $450 million budget for the bridges’ projects will be spend on design costs. The funds have already been approved as part of the department’s state highway fund budget, she says.

All interested design firms are encouraged to attend a question and answer session on Oct. 5 at 2809 Beryl Road in Raleigh. In addition to the design work being advertised in October, N.C. DOT plans to initiate improvement, enhancement or replacement of another 1,000 bridges during this same two-year period.
Read More.

Thursday, 29 September 2011

NC construction employment drops

Construction employment in North Carolina dropped by 200 jobs during August, a 0.1 percent decline that placed it among 24 states with employment losses in the building sector last month, according to data from The Associated General Contractors of America.

The Charlotte Business Journal reports the loss during August put the 12-month drop in construction employment for the state at 5,600 jobs, which leaves it ranked 37th nationally in construction-employment changes, with a 3.2 percent drop. Nationwide, 22 states added construction jobs last month, and 26 have seen employment in the sector grow during the past 12 months.

"There is no clear pattern of improvement in construction employment, although the industry is no longer in free-fall," Ken Simonson, the association's chief economist, says.

The Charlotte market lost 4 percent of its construction jobs in the 12 months ending in August. That’s a percentage point more than the state’s 3 percent decline.

The Charlotte-Gaston-Rock Hill area saw its construction work force drop to 36,606 from 38,100 during the year, according to the Associated General Contractors. Only two N.C. areas added construction jobs. Winston-Salem saw a 3 percent increase, while Raleigh-Cary had a 2 percent hike.

Wilmington led the state in percentage drop in its construction workforce, shrinking by 17 percent. Asheville’s jobs decreased by 10 percent. North Carolina shed 4,900 construction jobs by falling to 174,500 workers, a 3 percent loss. South Carolina experienced a 1 percent drop.

North Carolina's construction-industry job losses last month are part of a broader rise in unemployment. The N.C. Employment Security Commission said the state's unemployment rate rose to 10.4 percent in August from 10.1 percent in July. A year earlier, the statewide jobless rate was 9.1 percent. The N.C. economy gained a net 16,500 jobs last month, led by a 13,600-employee increase in the government sector, the ESC says. But the number of unemployed N.C. residents grew by 11,747 during August, increasing to 468,140, the agency says.

As previously reported, unemployment in the Charlotte region dipped to 11.2 percent in July from 11.3 percent in June. And Mecklenburg County's jobless rate was 11.1 percent, down from 11.2 percent in June, according to the state ESC. Read More.

Wednesday, 28 September 2011

Speed networking featured at NCMBC Construction Summit

The Wilmington Convention Center will be the site of a major statewide military and federal construction summit Oct. 19 and 20.

The once-a-year N.C. Federal Construction and Infrastructure Summit (FEDCON), formerly called MILCON, will focus on new construction opportunities, said Scott Dorney, executive director of the N.C. Military Business Center, which hosts the summit.

Attendance is restricted to general and specialty contractors in North Carolina, design firms, construction supply firms and current federal prime contractors seeking North Carolina partners and suppliers. The summit will feature speed networking with federal agencies, presentations, panel discussions, breakout sessions, and an exhibitor expo.

The summit also will focus on roadway, energy, environmental and infrastructure requirements of both the military and civilian federal agencies in North Carolina, Dorney said.

The summit's name was changed this year to FEDCON to reflect not only an emphasis on military construction at the state's bases but construction requirements of other federal agencies. Those include the Coast Guard, General Services Administration Public Building Service, and the Departments of Veterans Affairs, Homeland Security and Agriculture, according to Dorney.

Among those attending will be Major Gen. Jeffrey J. Dorko, deputy commanding general, military and international operations, for the Army Corps of Engineers; and Brig. Gen. Thomas A. Gorry, commanding general Marine Corps Installations East.

The conference will include discussions of new military construction projects, infrastructure construction projects and sustainment, restoration and modernization construction in fiscal year 2012, which starts in October. Other subjects include energy and environmental construction and engineering opportunities; and federal construction contracting processes. Individual admission is $105.

Click Here for more information. You may register online at http://www.ncmbc.us/2011FEDCONSUMMIT.php.

Monday, 26 September 2011

Construction cost trends for 2011

Source: US Department of Labor, Producer Price Index
Contributed By: BNi® Building News and Design Cost Data


Depending on the part of the country, housing is bottoming out and even showing signs of recovery. Nevertheless, fully 20% of home loans are “under water” and the effects of this remain to be realized. So we cautiously say that a further steep decline is probably not going to happen and that we should be starting to crawl out of the housing mess over the next three years. In some key markets, housing prices are actually starting to rise, while in others there seems to be little hope for the foreseeable future.

Public construction, once a bright spot, is down 5%, and with the budget constraints faced by public agencies, public construction seems to be on hold. Virtually all of the sectors of commercial construction are down, and represent a cumulative 6% decrease.

Hospitality spending is down a whopping 35-40% compared to last year. The total construction industry is off 5% this year compared to 12-15% last year, so at least the rate of decline seems to be subsiding.

Construction Materials

Construction material costs continue their rise and are up 4% for the year. Lumber prices are flat compared to last year, and may be finally bottoming out. Steel prices are still increasing and are up 4-5% from last year.

Millwork

The story hasn’t changed for the last several years. Due to the weak housing, commercial, and public construction markets, millwork will probably remain flat. After a small upward movement of 2% over the last two years, and a slight decrease last year, we now see gains of just 1%. Until construction returns or lumber prices escalate, millwork can be expected to remain flat.

Rubber and Rubber Products

After being flat for several quarters, rubber is registering increases in the 7% range. Stockpiles which were higher two years ago, are continuing a downward move. At publication, the price of crude is in a downward pattern, and may add to the volatility in the price of rubber.

Limestone

Same story for five years running: limestone is flat. Affected mostly by commercial and public building construction, limestone appears to have no movement at all. Despite increased fuel costs and a lack of new quarries we don’t expect any increases in the immediate future.

Sand & Gravel

After big gains right after 2004, sand and gravel price increases moderated to 1-2%. Now they are on the rise again. The highway portion of public works construction is causing the demand, and it seems to be one of the bright spots in public spending.

Clay and Ceramic

Clay and clay products were flat and now seem to be on a downward path. An improved public works sector would positively affect this commodity, but we don’t see any signs of this happening or any chance of price increases. Read More.

Is a mechanics lien filed against the property, the property owner or just the work?

by Scott Wolfe, Jr, Wolfe Law Group
Reprinted from Construction Law Blog

Short Answer: Mechanic liens are effective against the real property (i.e. the land itself and its improvements) where the work is performed.

Long Answer: We actually get this question a lot, as many of our clients are filing a lien for the first time and don’t quite understand how it works. They wonder whether the lien is field against just certain parties on the project (i.e. the owner, the prime, etc.), or against the project as a whole.

While lien laws are different from state-to-state, they are at least consistent in that they are filed against the construction project’s property itself in every jurisdiction. This means that the lien encumbers the property, preventing it from being transferred, sold, refinanced, etc., and allowing you to file an action to “foreclose” on the lien. Foreclosing on the lien is similar to the foreclosure executed by a bank on a property.

The lien is against the construction project property, and not any other property

All over the country, liens must be filed against the property where services or materials were furnished, and it is this specific property that is encumbered by the lien. If you’re unpaid on a construction project, you do not have the right to file a lien against any other parcel of property, including any proprety owned by the prime contractor or any additional property owned by the property owner.

The purpose of mechanic lien laws is to preserve the contractor or supplier’s right to get paid for the work they performed. When the product of their work is incorporated into someone else’s improvement, that improvement’s value is enriched by those services or supplies, and the law prevents the owner from being enriched to the detriment of any of the laborers or material men. However, the law goes no further, and doesn’t allow liens to be filed against unassociated property.

There’s no picking and choosing who is subject to a mechanic’s lien

You may have a terrific relationship with the prime contractor, knowing that your payment problem stems from a stingy property owner. Alternatively, you may have a great relationship with the property owner with all payment frustrations the result of a prime contractor’s misapplication or misappropriation of funds.
In these circumstances, folks sometimes want to file a mechanics lien, but only against certain parties – those at so-called fault. However, this is not workable with mechanic lien laws in any of the 50 states.

In short, a lien claimant cannot pick and choose who they want to file a mechanics lien against, and that’s because they aren’t really filing it against anyone. They are filing it against the property itself, and that grips all of the parties up the contracting chain from the lien claimant. While one party may be more guilty than another for non-payment, that will work itself out in the claims the non-guilty parties have against the guilty parties, but it has no bearing on your lien rights, which are against the property solely.

Your rights are in the property as a whole

Finally, many folks wonder if they can (or will) file a lien against the property as a whole, or just simply in the services or materials they furnished to the project.

Say, for instance, you furnished $50,000 of lumber to a construction project. If you are unpaid and file a lien, does your lien get filed against the lumber only, or against the entire project?

The answer – everywhere – is that your lien is filed against the entire project. The lumber itself has been “incorporated” into the property, and it is now one and the same with the improvement. Your lien will be against the improvement as a whole.

To the extent the materials have not been incorporated into the property (i.e. it has not been installed and is still piled up at your warehouse or factory), this may affect your right to lien at all. The idea behind lien laws is that you have the right to lien properties where your services or materials were incorporated. With limited exceptions (i.e. many states have exceptions for specially fabricated materials), if your materials are not incorporated into the property, you’re without rights.

You always have the right to file a lawsuit for breach of contract, but you may also have a UCC (Uniform Commercial Code) lien against the materials themselves. The tricky thing about this, however, is that once the materials are incorporated into the building or improvement, the UCC lien rights disappear. Read More.

Thursday, 22 September 2011

August construction climbs 8 percent

At a seasonally adjusted annual rate of $424.7 billion, new construction starts in August advanced 8%, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The gain followed a 10% decline in July, and continued the fluctuating pattern that’s been present in recent months. The pickup for total construction in August was the result of greater activity for each of construction’s three main sectors – nonresidential building, residential building, and nonbuilding construction. For the first eight months of 2011, total construction on an unadjusted basis was reported at $274.8 billion, down 6% from the same period a year ago.

The August statistics lifted the Dodge Index to 90 (2000=100), up from July’s 83.

“During the first five months of this year, total construction had trended downward, but over the next three months an up-and-down pattern has emerged,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “This suggests that construction starts are beginning to stabilize after the earlier loss of momentum. At the same time, total construction remains on track to register a moderate decline for 2011 as a whole, after leveling off in 2010. While August showed some improvement for institutional building and public works, each of these sectors will be subject to funding cutbacks at the federal and state levels of government. Single family housing continues to see homebuyer demand restrained by the sluggish economic environment and more restrictive lending standards. And, what appears to be the early signs of recovery for commercial building may well end up being deferred by rising investor concern about employment growth and the near term prospects for the U.S. economy.”

Nonresidential building in August grew 7% to $153.6 billion (annual rate). The institutional side of the nonresidential market showed a strong gain for healthcare facilities, which jumped 107%. .

The commercial side of the nonresidential market showed a mixed pattern by project type. Hotel construction surged 125% from a weak July, helped by the start of a $154 million convention center hotel in Nashville TN. Warehouse construction grew 30%, with the push coming from the start of a $150 million distribution center in Martinsburg WV, while store construction advanced 18%. Moving in the opposite direction was office construction, which fell 18% in August. A steeper decline was reported for the manufacturing building category, which retreated 62% from July which included the start of a $1.5 billion semiconductor plant in Arizona.

Residential building, at $128.0 billion (annual rate), increased 4% in August. Most of the upward movement came from multifamily housing, which rose 15% in August, continuing the trend that has been present for much of 2011. Single family housing in August managed to edge up 1%, as the pattern of recent months suggests that activity is stabilizing at a low volume after the declines witnessed earlier in 2011. The pace for single family housing in August, in dollar terms, was still 2% below the average monthly pace that was shown during 2010.

Nonbuilding construction in August climbed 13% to $143.0 billion, making a partial rebound after plunging 23% in July. The dams and river/harbor development category surged 283%. Sewer and waste disposal construction was also strong in August, advancing 64%. Other types of public works retreated in August, including a 21% drop for highways and bridges.

Murray noted, “Of the various project types, highway and bridge construction received the most support from federal stimulus funds over the past two years, but that support has diminished substantially during 2011.” August declines were also reported for “miscellaneous” public works (e.g., site work, rail lines, pipelines), down 8%; and water supply systems, down 14%. For the electric utility category, contracting continued to be strong with a 16% gain in August.

The 6% shortfall for total construction on an unadjusted basis during the January-August period of 2011 reflected a mixed performance by sector. Nonresidential building fell 8% year-to-date, as a 17% drop for institutional building outweighed a 4% gain for commercial building and a 72% gain for manufacturing building. Residential building decreased 5% year-to-date, with single family housing down 7% while multifamily housing advanced 8%. Nonbuilding construction year-to-date slipped 4%, as public works retreated 23% while electric utilities soared 129%.

By region, total construction starts showed the following year-to-date performance – the Midwest and Northeast, each down 13%; the South Atlantic, down 6%; the South Central, down 4%; and the West, up 4%. Read More.

Five Tar Heel cities named in 'Best Cities' list

Businessweek.com has dubbed Raleigh simply "the best American city." The Tar Heel State shone brightly in the report, with five cities placing in the top 46, including Raleigh being selected as the nation's best city. Charlotte was ranked No. 20, while Greensboro was ranked No. 31, Durham No. 37 and Winston-Salem No 46.

Businessweek.com based its rankings on 16 criteria, including the number of recreational amenities, strength of the local economy and the education level of the population. Raleigh edged out Arlington, Va., and Scottsdale, Ariz., for the top ranking.

In lavishing praise on Raleigh, the magazine mentioned the usual highlights, like Research Triangle Park (not in Raleigh, but close enough). Then there are three world-class universities - N.C. State University, UNC-Chapel Hill and Duke University - only one of which is physically in Raleigh.

Raleigh got bonus points for a great State Farmers Market and its good air quality. The city has also "been home to an array of celebs including Olympic champion Kristi Yamaguchi, Dexter star Michael C. Hall, and singer Clay Aiken (whose dog was even named Raleigh)." Read More.

Wednesday, 21 September 2011

NC construction employment drops

Construction employment in North Carolina dropped by 200 jobs during August, a 0.1 percent decline that placed it among 24 states with employment losses in the building sector last month, the Charlotte Business Journal reports.

The loss during August put the 12-month drop in construction employment for the state at 5,600 jobs, which leaves it ranked 37th nationally in construction-employment changes, with a 3.2 percent drop, according to data from The
Associated General Contractors of America.

Nationwide, 22 states added construction jobs last month, and 26 have seen employment in the sector grow during the past 12 months.

"There is no clear pattern of improvement in construction employment, although the industry is no longer in free-fall," reports Ken Simonson, the association's chief economist.

North Carolina's construction-industry job losses last month are part of a broader rise in unemployment. On Friday, the N.C. Employment Security Commission said the state's unemployment rate rose to 10.4 percent in August from 10.1 percent in July. A year earlier, the statewide jobless rate was 9.1 percent.

The N.C. economy gained a net 16,500 jobs last month, led by a 13,600-employee increase in the government sector, the ESC says.

But the number of unemployed N.C. residents grew by 11,747 during August, increasing to 468,140, the agency says.

Unemployment in the Charlotte region dipped to 11.2 percent in July from 11.3 percent in June. And Mecklenburg County's jobless rate was 11.1 percent, down from 11.2 percent in June, according to the state ESC. Read More.

Architectural Billings Index turns positive

On the heels of a period of weakness in design activity, the Architecture Billings Index (ABI) took a sudden upturn in August. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the August ABI score was 51.4, following a very weak score of 45.1 in July. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 56.9, up sharply from a reading of 53.7 the previous month.

“Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Many firms are still struggling, and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle.”

Key August ABI highlights:

◦Regional averages: Midwest (49.0), South (47.4), West (47.4), Northeast (46.5),
◦Sector index breakdown: mixed practice (50.9), institutional (48.5), commercial / industrial (46.0), multi-family residential (44.8)
◦Project inquiries index: 56.9
Read More.

Monday, 19 September 2011

Prices for key construction materials fall in August

The amount contractors pay for a range of key construction materials declined in August, but contractors continue to be squeezed as materials cost increases have outstripped the price of finished buildings over the past year, according to an analysis of producer price index figures released by the Associated General Contractors of America.
“The disparity between contractors’ materials costs and their selling prices threatens to push some firms and their hard-pressed workers out of business,” said Ken Simonson, the association’s chief economist. “Contractors just aren’t catching any breaks when it comes to current market conditions.”

Simonson noted that the monthly decrease in the materials index and its longer-term increase were the result of sharp price movements for a range of key construction materials. Those materials include diesel fuel, which was down 6.2 percent for the month and up 32.9 percent for the year; steel, which was down 1.0 percent for the month and up 14.3 percent for the year; and copper, which was down 3.3 percent for the month and up 21 percent for the year.

The construction economist added that prices were likely to remain volatile for the foreseeable future based on changes in broad-based global demand. “At best, contractors may get more short-term relief in the next few months, but they remain vulnerable to unpredictable price spikes, which can hit several materials at once and jeopardize firms’ viability,” he said.

Simonson noted that the index for new construction – what contractors charge for construction projects – was unchanged from the previous month for all building types except new industrial buildings, which declined by 0.2 percent. He added that annual increases in new construction prices, which ranged between 2.1 and 3.2 percent, paled in comparison to the annual increase in costs for many key building materials, forcing contractors to absorb the difference.

Association officials said contractors were having a hard time compensating for the steep annual increases in construction materials prices because demand for construction remains relatively weak. He noted that private sector demand has increased only slightly during the past year while public sector demand, particularly at the federal level, has been declining rapidly as the stimulus and other federal programs wind down.

“Construction firms are paying more for materials and charging less for their work, even as they chase a diminishing number of projects,” said the association’s chief executive officer, Stephen E. Sandherr. “Without a significant change in market conditions soon, this industry is going to continue to struggle to add jobs for the foreseeable future.” Read More.

NC construction contracts jump 58 percent

Due to a burst of infrastructure contracts, North Carolina’s overall total for new construction climbed an estimated 58% in July, for a total of more than $1.8 billion, according to McGraw-Hill Construction, publisher of Southeast Construction.

The company estimated the value of North Carolina’s July nonbuilding contracts at $897.1 million, well ahead of last July’s $180.3 million total for this sector. The other two construction sectors were down slightly for the month. Residential contracts totaled $470.6 million, or 7% below last July’s total. Nonresidential contracts tallied nearly $467.6 million, or 3% behind the pace of a year ago.

On a year-to-date basis, the same pattern holds. Nonbuilding has recorded an estimated $2.9 billion in new contracts, or 64% ahead of last year’s pace. The other two categories, again, are negative. Through July, nonresidential contracts total nearly $2.6 billion, or 18% below 2010’s pace. Residential is 13% behind, with nearly $3.3 billion in new contracts to date.

Overall, North Carolina’s year-to-date total for all contracts is nearly $8.8 billion, or 1% above last year’s $8.7 billion total. Read More.

Wednesday, 14 September 2011

Study committee to review and make recommendations to the NC lien law

Nan E Hannah, NCBA Construction Law Section Immediate Past Chair, reports the North Carolina Legislature has voted to create a study committee to review and recommend revisions to Chapter 44A (“the Lien Law”). The study committee will be comprised entirely of elected officials (senators and representatives) and will be limited to four meetings. The NCBA Construction Law Section believes that industry input is essential for the resulting legislation to be effective.

The following elected officials are serving on the committee: Chairs: Sen. Brunstetter and Rep. Sarah Stevens. Members: Sen. Goolsby, Sen. Stein, Sen. Harrington, Rep. Faison, Rep. Stam and Rep. Blackwell. Contact information can be found by going to www.ncga.state.nc.us and inserting the names in a “find a member” box.

If you are interested in being involved in the process, Hannah suggests you contact one of the legislators on the committee and volunteer your time and expertise. The goal from the outset has been for this process to be inclusive and for the end result to be a workable lien law which will inform and enhance the construction process in ways the current law does not seem to do, says Hannah.

"The NCBA Construction Law Section’s Lien and Bond Law Revision Committee is going to continue working on issues not addressed in what began as H489. If you have thoughts or suggestions you would like for th NCBA committee to consider, please share those with us," says Hannah. "If you have thoughts and suggestions specific to what you want the legislature to consider, contact the members of the Study Committee, she adds. Read More.

President's jobs proposal receives mixed reviews in Tar Heel state

President Barack Obama will visit the WestStar Precision manufacturing plant in Apex today before heading to a rally at Reynolds Coliseum at N.C. State University to plug his jobs proposal, reports the News & Observer .

North Carolina is suffering from an unemployment rate of 10.1 percent, which is above the national average. Obama is coming into the Triangle, where the economic slump has been milder than elsewhere in the country.

Rocky LaRusso, 50, who owns a remodeling business, says he has three months of work lined up. He said his business was very slow in 2009 and 2010 but began picking up in summer a year ago. "I'm not buying the gloom-and-doom thing," LaRusso said.

But other construction-related business owners say it has been a struggle. After working for an engineering firm for 15 years, Apex resident Jeff Roach started his own company, Peak Engineering & Design, in 2008. Roach said launching his company in the middle of a severe economic downturn forced him to focus relentlessly on marketing and identifying potential clients. He has since hired two employees and moved from a home office to leased space on Center Street in Apex.

"I am at that crossroads with a small company about needing staff now but being leery about adding anybody because of the uncertainty," Roach, 40, said. "In our market it's one of those things that you don't know what's going to happen three months from now let alone two years from now."

Given that most new construction projects can take 12 months or longer, Roach's clients want to be sure demand will be there for whatever they're building. Right now that's just not the case for most projects. "The clients that we're dealing with that are looking at new development have no idea where the economy is going, and they're scared to death to do anything," he said.

The President’s job proposals have received mixed responses from the nation’s construction-related organizations. The American Institute of Architects (AIA) and the Associated General Contractors of America (AGC) issued a joint statement urging policy makers to take immediate steps to create jobs in the design and construction industry. Stephen E. Sandherr, the chief executive officer of the AGC called for congressional support of the President’s job proposal.

The American Society of Civil Engineers also backed the planned investment. “ASCE is heartened by the President’s call to invest in America’s infrastructure, and his recognition that these critical funds will improve lives while at the same time creating thousands of jobs,” said president elect Andrew Herrmann. “We believe, as the President said tonight, that a world class infrastructure is what made America great. Reinvesting in that infrastructure can support a return to U.S. prosperity."

The Associated Builders and Contractors oppose the President's jobs proposal. ABC 2011 National Chairman Michael J. Uremovich, said, “Job growth will not begin until we first rollback the costly, burdensome and job-killing regulations that have buried business owners in government red tape and created a climate of uncertainty among construction contractors.” said Uremovich.

“Missing from the president’s plan was an initiative on public-private partnerships as an opportunity to responsibly invest in improving our nation’s infrastructure, including energy facilities, schools and military installations without adding to our deficit,” said Uremovich. “The Military Housing Privatization Initiative is one example of a public-private partnership where both the private sector and the federal government profited, jobs were created and federal infrastructure was improved, enhanced and expanded at no cost to the taxpayer, the federal government or the deficit.”

Also in today’s News and Observer article, Wells Fargo senior economist Mark Vitner said the country is now facing the prospect of economic growth of between 1.5 percent and 2 percent annually for the next several years, which is not fast enough to significantly bring down the unemployment rate.

"That's kind of the hard cold reality," he said. "There really hasn't been much evidence of a recovery. It's hard to find many areas that have gotten better." Vitner said Obama's jobs proposal, even if it does pass, includes a number of temporary tax cuts that have done little to boost demand in the past. "There's not a lot of good choices," Vitner said. "But we need to find a way to stimulate the economy that's effective and still allows us to reduce the budget deficit over the intermediary term. And that's not easy." Read More.

Monday, 12 September 2011

Private nonresidential construction falls 0.4 percent in July

In a sign that the economy is still in a slump, private nonresidential construction spending slipped 0.4 percent in July, according to the September 1 report by the U.S. Census Bureau. However, private nonresidential construction spending is 5.7 percent higher from the same time last year. Total nonresidential construction spending – which includes both privately and publicly financed construction – was $533.7 billion in July, down 1.1 percent for the month and down 1.7 percent from July 2010.

"We are now facing a period of declining spending in both public and private construction categories,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The momentum in commercial construction spending continued through July, but with financial market volatility and economic uncertainty generally on the upswing, it is likely that lending has become more cautious, which will likely translate into diminished commercial construction starts going forward."

Eleven construction subsectors posted decreases for the month including manufacturing, down 6.2 percent; conservation and development, 5 percent lower; and public safety, down 4 percent. Construction subsectors with the largest decreases on a 12-month basis were lodging, down 24.6 percent; religious, 20.8 percent lower; and sewage and waste disposal, down 13.7 percent.

In contrast, five of the sixteen construction subsectors posted increases for the month, including water supply, up 3.9 percent; religious, 2.3 percent higher; and commercial, up 2.2 percent. Four construction subsectors saw increases in construction spending from the same time last year including power, up 19.1 percent; commercial, 15.1 percent higher; health care, up 1.2 percent; and communication, 0.9 percent higher.

Public nonresidential construction spending fell 1.9 percent in July and is down 25.4 percent year-over-year. Meanwhile, residential construction spending dipped 1.6 percent lower for the month, but is up 4.1 percent compared to the same time last year. Overall, total construction spending decreased 1.3 percent in July, but is up 0.1 percent compared to July 2010.

“Today’s construction spending data are now reflecting the renewed weakness that began to pervade the economy earlier this year,” said ABC Chief Economist Anirban Basu. “The most recent gross domestic product data indicated that the economy grew less than 1 percent on an annualized basis during the first half of this year, and that inevitably will translate into weaker construction spending during the months ahead.

“The construction data are also reflecting the impact of diminished state and local government fiscal health. Spending declines were posted in public safety-related construction, education-related construction, and sewage and waste,” said Basu. “Decline in these categories is likely to persist for the rest of this year in much of the nation due to a general lack of revenue growth among the nation’s local governments.” Read More.

Contractors: NC lien law loopholes can wipe out your lien rights

Guest editorial by Gregory L. Shelton, Horack, Talley, Pharr & Lowndes, P.A.

In the current unfavorable economic climate, the ability to assert lien rights can determine economic life or death for those who furnish labor or materials to construction projects. On the other side of the equation, developers and owners are taking matters into their own hands to avoid costly and disruptive liens.

For example, owners are more closely monitoring downstream payments, strictly enforcing lien waiver requirements, and communicating directly with first, second, and third tier subs and suppliers as the project progresses. While these risk mitigation techniques are easy to implement, owners desiring even more protection against liens are structuring development deals to take advantage of loopholes or weaknesses in North Carolina’s mechanic’s lien law.

In Pete Wall Plumbing Co., Inc. v. Sandra Anderson Builders, Inc., et al., COA09-1449-2 (Sept. 6, 2011), the Greensboro Housing Authority (the “Housing Authority”), a quasi-governmental entity, employed this latter technique to effectively eradicate lien rights for the subcontractors and suppliers involved in the construction of six low-income homes. Through a series of transactions, the Housing Authority, its construction lender, the developer, Willow Oaks Development, LLC (“Willow Oaks”), and the general contractor, Sandra Anderson Builders, Inc. (“SAB”), effectively eliminated the lienable property interest.

The details of the plan are set forth in the Court of Appeals’ lengthy opinion, but in short, the Housing Authority leased the six properties to Willow Oaks who, in turn, subleased the properties to SAB. The subleases required SAB to construct the single family homes on the properties, and further provided that SAB would be the “owner” of the improvements during the term of the Subleases. Upon completion of the work, SAB was required to “convey the Improvements to a Homebuyer in accordance with the provisions set forth in the Master Ground Lease.” The Subleases were recorded with the Guilford County Register of Deeds.

SAB, the now defunct general contractor/subtenant/“owner,” failed to pay its first-tier subcontractor, Pete Wall Plumbing Co., Inc. (“Pete Wall”), for plumbing supplies and services furnished on the properties. By the time Pete Wall served the interested parties with liens on the contract funds and properties, four of the six properties had already been conveyed by “owner” SAB to the new homeowners, and the two unsold properties were subject to the construction lender’s priority interest in foreclosure.

Pete Wall filed a lawsuit to enforce its liens, but the trial court ordered that the liens be discharged (canceled) on the grounds that Pete Wall’s lien rights encumbered only SAB’s interest in the properties, and SAB’s interest in the properties terminated when the properties were sold.

The Court of Appeals agreed with the trial court, observing that it was ultimately Pete Wall’s decision “to furnish materials to an entity with only a time-limited interest in the properties.” The Court also noted that the extent and terms of SAB’s interest in the properties were a matter of public record. In his concurring opinion, Judge Steelman agreed with the Court of Appeals’ conclusion, but expressed concern about the use of complex real estate agreements to “effectively eviscerate the constitutionally protected lien rights of laborers and materialmen.”

The Pete Wall decision will be attacked and defended by the various constituencies on legal and moral grounds. There is much to debate, because the Court of Appeals could have employed the language of Chapter 44A (the lien statute) to reach the opposite result. But for now, everyone involved in construction should recognize what the decision means going forward. For owners and developers, the Pete Wall decision represents a green light for Rube Goldberg-type real estate transactions designed to eliminate the possibility of any lien ever attaching to their property. For potential lien claimants (contractors, subs, suppliers, laborers, and design professionals), the decision highlights the importance of due diligence before signing on the dotted line. Read More.

UNCC economist forecasts a slow recovery

The state's economy will continue its sluggish recovery through 2012, and despite some improvement in the job market, hiring is likely to remain tight, UNC Charlotte economist John Connaughton forecasts.

The Charlotte Observer reported Connaughton expects North Carolina's economy to grow just 1.7 percent this year over the 2010 level, which is lower than his predictions earlier this year. "That's slower than the 2.6 percent growth rate in 2010," he said. The economist made the predictions in his quarterly Babson/Capital UNC Charlotte economic forecast.

The economic weakening in North Carolina and across the country this year is due in part to the still-struggling construction sector and hesitant consumer spending, Connaughton said.

"The most likely outcome is that the continued sluggishness in both the U.S. and North Carolina economies will last for several years," he said. "It will take some time for a rebound in the residential construction industry and at least that long for U.S. households to reach their desired level of debt."

Connaughton expects companies in the state to gain 23,600 net jobs this year. That's better than the 5,600 net jobs North Carolina companies added in 2010, but it does little to make up for the more than 320,000 jobs lost in 2008 and 2009.

The state unemployment rate - 10.1 percent in July, the latest government data show - will probably end this year around 10.3 percent, Connaughton said. The Charlotte region's unemployment rate is above the state average, 11.2 percent in July.

Eight of the state's 11 economic sectors are forecast to experience output increases in 2011, with the strongest growth coming from finance, insurance and real estate - which took a hit in the Charlotte area and beyond during the recession - wholesale trade and nondurable goods manufacturing.

Construction and mining are among the fields expected to experience declines this year, Connaughton said.

Five of the state's 10 nonagricultural sectors are expected to add jobs this year. Wholesale trade will probably post the biggest gain, 5 percent, followed by retail trade, services and finance, insurance and real estate, Connaughton said.

The outlook for next year isn't much better: Connaughton expects the economy to grow 1.9 percent in 2012. He expects nine sectors to experience output increases, with big gains coming from retail trade, wholesale trade and services. Construction, which was pummeled during the recession, is expected to grow next year. Connaughton predicts that North Carolina companies will add 28,600 net jobs. The unemployment rate will probably remain inflated through 2012, ending the year at 10.3 percent, he said. Read more.

Contractors group urges support of President's jobs proposals

The chief executive officer of the Associated General Contractors of America, Stephen E. Sandherr, issued the following statement in support of President Obama’s jobs proposal:

"As the President made clear last week, too many Americans are out of work or underemployed. Nowhere do we see that problem more severely than within the construction industry. Although construction represents only 4.5 percent of the U.S. workforce, construction workers have accounted for over 20 percent of the jobs lost. Today the industry’s unemployment rate is 13.5 percent – significantly higher than the national average.

“If it weren’t for the stimulus and other public investments in infrastructure projects, however, that unemployment rate would be much worse. Indeed, employment levels in heavy and civil construction – the type of construction funded by the stimulus – have remained stable and even grown slightly since the stimulus first kicked in, while the rest of the industry continued to shed jobs.

“Should Congress fail to enact the desperately needed infrastructure investments the President proposes, too many construction workers will remain unemployed, the private sector will suffer, and taxpayers will end up paying more, later, for infrastructure. Infrastructure projects don’t just create construction jobs. New construction activity boosts demand for steel, concrete, construction equipment and countless other services and supplies.

“Construction projects boost sales at everything from the lunch wagon near the job site to the truck dealership across town. Improved highways and transportation systems also help businesses turn commodities into cash by cutting shipping times and improving their efficiencies. And investing in infrastructure projects saves taxpayers money over the long run, because it costs more to rebuild broken roads and deteriorated structures than to maintain them.

“Investing in infrastructure is the most effective way to create good jobs, deliver great roads, build a strong economy and protect taxpayers. That is why the Associated General Contractors of America stands with the president and everyone else who is willing to make the investments needed to revive our industry and rebuild our economy.” Read More.

Purdue announces plans to accelerate urban loop projects

WNCT reports Gov. Bev Perdue announced at the Piedmont Triad Regional Transportation Summit that there's a new plan to accelerate urban loop projects in six North Carolina cities.

Perdue said the plan moves critical transportation projects forward faster and sustains and creates jobs, "Investing in our state’s infrastructure is about jobs. Not only will it create jobs, but it also will build an efficient transportation network that will attract new businesses and bring more jobs to our state in the future.”

The plan will use Grant Anticipation Revenue Vehicle, or GARVEE bonds, and significantly advances the purchase of right of way or the start of construction on urban loop projects in Greenville, Asheville, Fayetteville, Greensboro, Wilmington and Winston-Salem. GARVEE bonds allow the N.C. Department of Transportation to borrow against future federal funding.

The urban loop program totals 353 miles, 140 of which are currently open to traffic. The estimated cost to build out the remaining 213 miles is about $8 billion. At the previous funding rate, it could have taken more than 50 years to complete the program. Read more.

Friday, 9 September 2011

North Carolina Construction News publisher participates in Hurricane Irene relief efforts


Your publisher returned last Thursday from a 14-day deployment as a volunteer with the American Red Cross to assist in the Hurricane Irene relief efforts. Last week a news reporter from News14 arrived at the shelter to broadcast the attached story. What the reporter did not say is that at the peak of the storm the Pamlico Community College shelter (near New Bern)housed and fed 250 residents. Many Pamlico County residents lost homes, cars and belongings. The Red Cross and FEMA are attempting to find temporary and permanent housing for the remaining shelter residents.

My hat goes off to the many Carolina volunteers who gave up hours of personal time to help those in need. One Raleigh contractor I met, Troy Hutchins, Hutchins Construction, drove down to the coast over the weekend to personally help our shelter clients in their cleanup efforts-without expecting any compensation. We welcome stories from our readers about their Irene experiences. As volunteers we did some good in Pamlico County, but it sure feels good to be back home and writing for North Carolina Construction News. Click here for the News14 story.