Archive for December, 2017

A Trillion Short on Infrastructure Plan

Wednesday, December 13th, 2017

It is safe to say that the Trump presidency, thus far, has been a disappointment when it comes to infrastructure investment. Trump, the candidate, promised a $1 trillion, 10-year program to address some of the massive needs of our transportation, water/wastewater and other infrastructure systems. Trump, the president, has failed to deliver on it.

Worse, the centerpiece of Candidate Trump’s plan — which was that private investment would increasingly supplement (and possibly supplant) public money — is at odds with comments made by President Trump to a group of Democrats and Republicans at a meeting in late September.

Even worse, Trump’s first budget sought to slash transportation and environmental spending, with the US DOT’s discretionary budget dropping by 13 percent and the EPA losing more than 30 percent. The House and Senate have since passed their own versions, which aren’t nearly as damaging, but the intent is still clear, as evidenced by this passage: “The Administration’s goal is to seek long-term reforms on how infrastructure projects are regulated, funded, delivered, and maintained. Simply providing more Federal funding for infrastructure is not the solution. Rather, we will work to fix underlying incentives, procedures, and policies to spur better, and more efficient, infrastructure decisions and outcomes, across a range of sectors.”

As noted in PSMJ’s 2018 A/E/C Firm U.S. Market Forecast, industry trade groups and advocates aren’t happy. The American Road and Transportation Builders Association (ARTBA) reported that OMB Director Mulvaney said, in a conference call with them, “People might say, well, goodness gracious, that doesn’t line up with what the president said about a commitment to infrastructure. That was done intentionally. What we’ve effectively done is try to move money out of existing, more inefficient programs, and hold that money for what we expect to be more efficient infrastructure programs later on.”

In a statement, ARTBA said, “While ARTBA continues to support and advocate for a large infrastructure package along the lines of what the President promised on the campaign trail, we do not support cutting current infrastructure investment as a down payment to some future infrastructure measure. While Director Mulvaney is suggesting the funds will be used later for the infrastructure package, we should be clear his proposed infrastructure spending reductions would be used now to supplement increases in defense and security spending.”

With public-private partnerships apparently out of the picture, other issues taking precedence (tax reform, health care), and Trump’s difficulty in rallying his own party to pass legislation, it will likely be some time before any kind of infrastructure package is passed. Moreover, the Democrats — smelling blood after making gains in November and yesterday’s Alabama special senate vote — are unlikely to cooperate and hand the Republicans a win with the midterms less than a year away.

Sometimes forgotten in the talk about the Trump Trillion is that Congress passed and President Obama signed the FAST Act in December 2015, so enabling legislation is in place through 2020. Nonetheless, the high hopes the industry had after Trump’s unexpected win in 2016 are fading fast, likely signaling a return to the battle for sufficient funding to repair, maintain and improve the worsening U.S. infrastructure system.

One saving grace is that many states and metropolitan areas have passed laws providing new sources of funding for infrastructure projects. In other words, they’re not waiting around for the federal government to come through. This issue is examined extensively in the Forecast, which you can purchase at http://store.psmj.com/2018-a-e-c-firm-u-s-market-sector-forecast/.

“Charting” and “Graphing” the A/E/C Firm Forecast for 2018 and Beyond

Wednesday, December 6th, 2017

The 285 pages of the recently published report, The 2018 A/E/C Firm U.S. Market Forecast, include almost 90 tables and graphs to help illustrate the book’s analyses and projections. Published in November by PSMJ, the Forecast assesses seven major markets and more than 40 sectors and subsectors for their outlook heading into 2018. The thoroughness of the research is indicated by the more than 30 pages of references in the Appendix — over 200 sources total.

Though the book focuses on 2018, it seeks to provide insight into years 2-5 in the cycle as well. It also looks at the industry’s outlook and the various market sectors from the outside in, addressing how geopolitical, economic and societal indicators will affect the markets going forward.

As for the tables and graphs, I’d like to share a few of them to give some sense of how they contribute to the overall product (which is available for purchase at http://store.psmj.com/2018-a-e-c-firm-u-s-market-forecast).

Chart 1, Page 9. After the introduction, the book begins with 10 trends in the industry. These include several technology-based issues, including The Internet of Things, big data, autonomous vehicles and building information modeling (BIM). One of the trends in this year’s version of the book, which has been included as a trend all seven times I’ve written a book like this, is about hiring (“Hiring Challenges Rise Up”). A few years ago, the gist of the story was how the recession and post-recession economy offered opportunities for staff upgrades. Now, we’re back to the war for talent. The chart below shows how the number of U.S. architecture grads has flatlined over the years, even decreasing some. Engineers, meanwhile, experienced a notable dip beginning in the 1980s and carrying through to about 2010, at which point the line starts a slow, steady climb.

The data comes from the informative, recently released Projections of Education Statistics to 2025, from the National Center for Education Statistics. Graduation rates for architects, in particular, are forecast to remain muted, while engineers may continue to see small gains across all disciplines, according to the publication.

The chapter delves into other hiring challenges, including gender issues, immigration and demographics. As with all of the trend chapters, it includes strategies as well.

Here are two of the nine strategies in this section:

  • Reward your superstars inordinately. Don’t worry about upsetting your average employees by taking care of your above-average ones. If you don’t reward for performance, you’ll end up losing the high performers and keeping the mediocre (or worse) ones.
  • Make sure your office is a place people want to be. Take a fresh look at the environment that your people are working in. If you weren’t used to it, is this a place you would want to come to every day? Are you taking measures to build a corporate culture that fits the firm and meets your people’s needs? Is your firm hospitable to women and minorities?

Table 17, Page 105. Because many A/E/C firm sectors and subsectors are driven by local and regional factors, the book focuses on “where” things are happening as much or more than “why” and “when.” For the multifamily market, as well as some of the commercial (e.g., office, industrial) and transportation markets (e.g., airports, ports), we included a table or bullet list that addresses the status and outlook by city or state. Below is an example.

Sources for the multifamily and commercial markets include the exceptional research arms of real estate companies such as Marcus & Millichap, Colliers, CBRE and Cushman & Wakefield. Table 17 includes a similar analysis for over 40 metros.

 

Graph 41, Page 212. A major finding of the health care section of the book is that the trend toward smaller, more flexible space in the sector is likely to continue. Medical office buildings and urgent care centers appear to be on the upswing, while major hospital projects — still occurring at times — are not expected to be as common. The continued reduction of time that patients spend in a hospital bed is an indicator of why this is so.

Graph 25, Page 152. In the final chapter of the book, each of 41 sectors and subsectors are ranked “best to worst.” In reality, most of the markets appear to be in at least decent shape heading into 2018. The purpose of the rankings is to put some context into the relative strength or weakness of each market, so it includes a “grade” (A-F) and an arrow indicating if it is heating or cooling, and by how much.

This is, of course, an imprecise exercise, but based in the knowledge and insight gained through hundreds of hours of research and discussions with industry owners, experts and practitioners.

Among the highest-rated of the markets is “Industrial/Warehouse,” which is benefiting from the e-commerce boom and its various practices. This includes robotics technology, “last-mile” delivery and so on. In addition to moving ever closer to the end user, warehouses are also a prominent piece of the increasing buzz around ports and their distribution networks.

The graph below illustrates how strong the warehouse market has been, nationally speaking.