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Atlanta

INTERNATIONAL INSIGHT ATLANTA 12.2015

INTERNATIONAL INSIGHT ATLANTA 12.2015

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Atlanta

CONSTRUCTION MARKET OUTLOOK/STATISTICS ATLANTA CONSTRUCTION STATISTICS INFLATION SECTORS OF ACTIVITY PROCUREMENT AND CONTRACTS RESOURCES ATLANTA OUTLOOK SUMMARY GLEEDS ATLANTA CONTACTS

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CONSTRUCTION MARKET OUTLOOK/STATISTICS

DODGE DATA & ANALYTICS (DDA) HAS VALUED THE ATLANTA METRO AREA AHEAD OF PREVIOUS CONSTRUCTION MECCAS OF LOS ANGELES, SEATTLE, AND MIAMI, FOLLOWING THE RISE IN CONSTRUCTION SPENDING IN 2015.

The Housing Market Survey Index reported in October that “home builders haven’t felt this good about the housing market since 2005”.

Atlanta

After a number of years of lackluster activity, Gleeds describes Atlanta’s construction market as optimistic, strengthening with the growing economy. Gleeds is seeing that general contractors are much busier than a year ago. This is reflected in the level of interest in new projects in general. It is possible that infrastructure works may take place over the next few years to improve the waterways serving Atlanta and the wider state area. This will be determined by the result of the pending federal lawsuit regarding the use of water from Lake Lanier.

A number of significant projects are taking place around the Atlanta area including the Falcons’ National Football League Stadium and Braves’ Major League Baseball Stadium which have brought some of the larger construction firms back into the Atlanta market. Plans for the west side of Atlanta are progressing, but the city has just lost out on a sizeable federal grant to assist in the redevelopment of some of the more destressed areas. Other areas prime for development include Turner Field in downtown Atlanta (when the Braves Baseball team moves out), HartsfieldJackson Atlanta International Airport, sites around Interstate 285 and along all interstate highways.

 he Savannah Harbor Expansion T Project (SHEP) will deepen the Savannah Harbor federal shipping channel from a depth of 42 feet to 47 feet. The SHEP is expected to net more than $174 million in annual benefits to the nation. It will fuel Georgia’s economic growth and in turn have a positive impact on Atlanta through new companies moving to the area. It will also accelerate Hartsfield-Jackson Atlanta International Airport’s expansion as a leading logistics and cargo hub.

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ATLANTA CONSTRUCTION STATISTICS

Atlanta

According to the Bureau of Labor Statistics, the rate of annual increase in construction output nationwide between 2012 and 2022 is predicted to rise 4.1% i.e. to $1.16 billion in 2022. Employment in the construction sector is expected to see a large increase before 2022, but is not expected to exceed pre-recession levels. Construction output by sector September 2014 - September 2015 Census Bureau Manufacturing 41.3% Residential 17.2% Education

11.5%

Infrastructure 10.2% Healthcare

9%

Commercial 2% Note: These are nationwide statistics

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Atlanta

INFLATION

SECTORS OF ACTIVITY

Gleeds continues to see substantial growth across most sectors of construction. There may be other factors such as the Federal Reserve increasing interest rates, uncertainty in the upcoming presidential elections and new government policies that might impact the economy.

COMMERCIAL

INDUSTRIAL AND MANUFACTURING

In the Cumberland area, office landlords have seen development of more than 560,000 ft² of office space, with in excess of 200,000 ft² being Class-A properties. This is according to CoStar Group numbers. The Perimeter area is also seeing an increase in new offices, including the State Farm development and Mercedes-Benz’s new headquarters. Another upcoming office complex includes North Place, a 3.7-acre site to be anchored by 2 office towers.

The Southeast is an industrial hotspot. Manufacturing firms have been establishing premises here for several decades, recently primed by major investments from German and Japanese companies, among others. In neighboring Tennessee, manufacturing employment has increased by approximately 25% since 2009. Japanese motor companies Nissan and Bridgestone have established manufacturing plants in Central Tennessee, which has also created opportunities for small domestic parts companies in the region.

Oil prices remain very low and it is doubtful that this will impact and contribute to a rise in tender price inflation (TPI).

Gleeds’ prediction for tender price inflation for 2016 currently stands between 3% and 5%. (Inflation will vary across sectors)

HOTELS

There is increased hospitality activity in the Southeast. Plans for the development of a Georgia World Congress Center convention hotel are underway in downtown Atlanta, and the Atlanta airport has outlined terms of a 50year lease for three companies to compete for the right to build and operate a hotel next to the airport. Nearly 600 new hotel rooms are planned for Alpharetta, a market that last saw a permit issued for new hotel construction in 1999.

RESIDENTIAL

In the last year, the population of Atlanta has grown by approximately 60,000 people, about 15,000 more than the average annual change from 2010 to 2015. Nationally, private residential construction spending was up 17% in 2015 compared with 2014, powered by a boom in multi-family projects.

AMLI Residential and Post Properites are 2 of the developers currently active in the sector, with a number of large scale developments underway and in proposal. This includes Post’s 23-story 356-unit Midtown Millennium project. AVIATION

Atlanta Hartsfield-Jackson International Airport remained the world’s busiest airport in 2014 in terms of overall passenger numbers. The City of Atlanta Department of Aviation commenced a new master plan for the airport in early 2015. Some short-range master plan projects anticipated to be needed through 2021 include a taxiway, runway extension, airfield safety area and access improvements, east gates phase 1, concourse D holdroom expansion, plane train turnback relocation, terminal modernization, additional parking and cargo expansion.

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Atlanta

PROCUREMENT AND CONTRACTS Procurement is most commonly via Construction Management at risk (with a negotiated guaranteed maximum price) or Design and Build. However, procurement route varies depending on owner preferences, with the public sector tending to prefer a request for proposal approach. Initial selection is then based on qualifications and capability with the price negotiated later.

RESOURCES

The AIA suite of contracts are most commonly used, but Gleeds is seeing an increasing reliance on proprietary suites of contracts developed by legal advisors. The Consensus Docs, a collaborative effort of most major construction trade organizations (with the notable exception of the AIA), have been used with greater frequency, particularly in integrated project delivery settings; however, they have not supplanted the AIA forms despite strong marketing efforts. EJCDC contracts are sometimes used for large “horizontal” civil projects. EPC (Engineering, Procurement and Construction) or EPCM (Engineering, Procurement and Construction Management) methodology is common where the project calls for heavy engineering, while some bigger clients use their own customized forms of contract.

The American General Contractors survey found that 86% of construction firms are having difficulties finding qualified workers to fill vacant positions. Gleeds describes current labor availability as sparse, although labor costs tend to be less costly than in the UK. The following trades are expected to be in short supply over the next 12 months: •

Carpenters

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Steel welders

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Sheet metal installers

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Electricians

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Masons

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Plumbers

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Millwrights

Although expected to be minimal (between 0% and 3%), the prices of structural steel, reinforcing bars, gypsum board (and related products), and plywood are expected to increase over the next year. It is possible that copper and steel will also be in short supply over the same period.

An increase of 7,300 construction jobs in Atlanta (from 103,600 in august 2014 to 110,900 in August 2015)

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ATLANTA OUTLOOK SUMMARY

GLEEDS ATLANTA CONTACTS

With several high profile construction projects active and on the horizon in the Atlanta market, the near term outlook is robust. Corporate headquarters relocations to Atlanta, on hiatus for several years after a boom, are back on the rise. However, Atlanta has a history of overbuilding in a hot market and then having to catch up for several years, thus creating lulls. Public transportation and infrastructure construction starts have tended to lag behind population growth. Atlanta’s growth will ultimately be halted unless tangible changes in culture and lifestyle take place.

Chris Soffe President E: [email protected]

Chris Williams Executive Vice President E: [email protected]

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