The news about the construction industry the past few years has been bleak, but construction companies in NH are seeing some signs of life in the marketplace, particularly in the education and health care sectors. While there have also been slight upticks in other areas of construction, those gains often don’t make up for the loss in business incurred in past years.
Nonresidential construction spending nationally hit a peak of $60 billion in July 2009, and the closest it’s come to that in the last three years was $53 billion in August 2012, based on U.S. Census data. In NH, the total value of new housing units authorized dropped 6.4 percent from 2010 to 2011, then increased 2.6 percent between 2011 and 2012.
Education and Health Care
Companies report that the bulk of new construction, additions and remodels in NH continue to be in the institutional sector: colleges, universities and hospitals. And that was consistent even throughout the recession, says Michael Sparling, an estimator with American Steel in Manchester.
“We’re fortunate to live where we do in that New Hampshire is full of world class hospitals and universities, so we’ve been able to just keep right on going,” Sparling says. “They seem to build and keep going regardless of what the economy is doing.”
Frank Lemay, president and owner of Milestone Engineering and Construction in Concord, says he too is seeing more work from the medical sector and attributes the shift to changes in the field itself. “I think [it’s] because the medical industry keeps changing,” Lemay says. “You know, to change things you have to renovate things. I think that we as a people want more and more from medicine, and they are adapting every year. We expect more every year. So consequently, the medical industry keeps changing and that results in more work.”
Some of these projects include a $2 million renovation to Concord Hospital 6th Floor North in-patient wing. Brewster Academy in Wolfeboro saw $50,000 in dining hall renovations, UNH did $600,000 worth of renovations on its Horton Hall classroom, and NHTI, Concord’s Community College, did $500,000 in general renovations.
Further, North Branch Construction in Concord last fall began a design-build project of a new four-story residence hall at Southern NH University in Manchester. The 80,000-square-foot project is part of a $60 million slate of improvements that also include a new library.
Lemay thinks this trend is likely to continue. Most institutions have long-range plans that include maintenance and construction, he says, and where officials were able to put off improvements between 2008 and 2010, prices are not holding like they were then. Even though everything else is stagnant, he says, construction is steadily increasing in price. Over the past year, for example, anything with manufactured metal has seen steady price increases every three months as have other products like drywall and metal studs.
“In the broader picture, you are back in a phase where, if you put it off, it will cost more,” Lemay says. “Unlike 2008 to 2010, that was not the case. Prices would hold across the board, that’s no longer true.”
Generally material prices are increasing 2 to 10 percent per year with manufactured metals and equipment. With the improvement in the housing market, Lemay says, lumber prices are up as much as 50 percent on some products over last year.
Other Upticks
Ken Holmes, president of North Branch Construction in Concord, says demand for multi-unit housing is up because of demand for workforce and affordable housing.
Doug Hounsell, sales manager for Wallace Building Products in Danbury, agrees. “The rental market is good,” Hounsell says. “There are more people than there are rentals … This trend started a year ago. The construction industry was down as we all know and it started to ramp back up.” He attributes the increase in multi-unit housing to the improving economy and the lack of supply.
In NH, the number of new housing starts jumped from 154 in March 2012 to 188 in March 2013 according to Census figures. And while multi-family housing made up 17 percent of those starts in March 2012, that nearly doubled to 29 percent in March 2013.
Meanwhile, commercial businesses continue to be hesitant to expand, Holmes says-—but there are exceptions. Among them is the manufacturing sector. North Branch just completed a 12,000-square-foot, two-story test facility for Sig Sauer in Newington.
As for Lemay, his company just finished upgrading a foundry for Watts Water Technology in Franklin. The project was a 27,000-square-foot expansion of a new no-lead foundry for domestic water valves. Lemay says building costs were more than $4 million. Lemay’s company also recently worked on a $7 million project for Lindt Chocolates in Stratham where they constructed a 40,000-square-foot corporate office expansion along with 25,000 square feet of office and cafeteria renovations.
“We are seeing the industrial side has adapted to the economy we are in and they continue to move forward,” Lemay says.
Stacey Jellison, vice president of TM Jellison Construction Company Inc. in Canaan, says she is seeing more warehouses and distribution centers being built. And when it comes to office buildings, she’s seeing a “steady trickle” of renovations. “People need new roofs, and when you need a new roof, you need a new roof and you can’t wait for the economy to repair it,” Jellison says.
Looking Ahead
Construction companies say many areas look like they are picking up, or will be soon. Sparling of American Steel says his company is currently inundated with work, so much so that they have to be selective about the projects they choose. “And that hasn’t been that way in previous years,” he says. The number of project inquiries and bids has doubled in the last year, he says. There is so much work, the company had to hire a second estimator and they are still turning away work.
“I think in the last year, at least, (American Steel) is seeing more of the private or large corporations investing,” Sparling says. “I think we’ve turned a corner and I think they are a little more optimistic. Some of the things that maybe were on the verge of being built in 2008, [when] things collapsed and they were put on hold, now they are coming forward with it.”
While most construction companies report that single-home building has remained at the same level of activity since the recession, which is to say not great, Holmes has seen a considerable uptick in the number of new homes
According to the US Department of Commerce, nationally housing starts in March 2013 were at a seasonally adjusted annual rate of 1,036,000, up 46.7 percent from March 2012.
“We are seeing it particularly in lakefront sites, so vacation or second home situations, but as well as primary residence,” he says. “Typically in recessions, we see single-family housing deteriorate and commercial follows that by a year or two. Conversely, when an economy improves, we usually see the housing market pick up before the commercial market picks up. And that seems to be what we’re seeing right now.”
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