November 29, 2012

Marcum LLP Launches Commercial Construction Index; Third Quarter Investment Declines 4.4%

Marcum LLP Launches Commercial Construction Index; Third Quarter Investment Declines 4.4%

New York, NY – Marcum LLP, a top national accounting and advisory firm, today unveiled a new quarterly index tracking the performance of the U.S. commercial construction industry. The debut Marcum Commercial Construction Index finds that total nonresidential structures investment in the third quarter of 2012 declined 4.4%, despite 2% annualized growth in the national economy during the period. Year-over-year nonresidential construction spending in the third quarter rose a modest 2.6%, well below the more than 19% growth in residential construction. 

“Despite 13 consecutive quarters of economic growth, nonresidential construction has not been among the sectors experiencing meaningful recovery. The agonizingly slow recovery in nonresidential construction spending is attributable to many factors, including fiscal cliff fears, tight credit, cautious developers and stubbornly high vacancy rates in many market segments,” said Marcum Chief Construction Economist Anirban Basu, who is also Chief Economist for the Associated Builders & Contractors (ABC) organization. “On the brighter side, the latter half of 2013 could be surprisingly good if Washington is able to successfully navigate the nation past the fiscal cliff, given the large volume of construction projects that were put on hold over the course of 2012.”

Other highlights in the third quarter include the following:

  • Three sectors of nonresidential construction spending demonstrated rapid recovery year-over-year:
    • Lodging (25.0%) – although investment was down slightly (2.7%) from the second quarter of this year.
    • Power (19.2%) and Transportation (11.0%) – Many of the nation’s largest ongoing construction project fall with these categories, including Chicago O’Hare International Airport’s modernization program ($8.8 billion); the Dulles Corridor Metrorail Extension Project in Washington DC ($6.2 billion); the Alaskan Way Viaduct project ($3.1 billion); and Shepherd’s Flat Wind Farm in Oregon ($2.0 billion).
  • Public nonresidential spending declined 0.8%.
    • Sectors primarily associated with state and local government capital funding experienced the greatest decreases, including water supply (12.7%), conservation and development (6.5%), education (3.2%), and highway and street (2.2%).
  • Regionally, the western United States was among the best performers in terms of rising construction volumes, including Los Angeles, Phoenix and Las Vegas. This was offset by dissipating momentum in the southern U.S., due to a slowdown in industrial production, particularly in Alabama and Mississippi.

“The Marcum Commercial Construction Index provides another strategic tool our clients can use to help guide their business decisions, particularly with regards to planning for a possible reversal of the downward trend next year. It is important to ensure that our construction clients are properly positioned to capitalize on increased business and have the appropriate bonding and bank lines in place to support the new business,” said Marcum Construction Industry Group Leader Joseph Natarelli, Partner-in-Charge of the Firm’s New Haven Office.

Marcum LLP’s Construction Services Group provides strategic and timely accounting, audit, consulting and taxation services to construction clients ranging from start-ups to multi-billion-dollar enterprises. The firm’s technical experts serve on many industry boards and committees and regularly contribute to construction conferences and publications.

About Marcum LLP
Marcum LLP is a top-ranked national accounting and advisory firm dedicated to helping entrepreneurial, middle-market companies and high net worth individuals achieve their goals. Marcum’s industry-focused practices offer deep insight and specialized services to privately held and publicly registered companies, and nonprofit and social sector organizations. The Firm also provides a full complement of technology, wealth management, and executive search and staffing services. Headquartered in New York City, Marcum has offices in major business markets across the U.S. and select international locations. #AskMarcum.

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