Archive for the ‘AEC’ Category

Multifamily-for-Rent Market on a Sustainable Roll [As Seen in PSMJ Newsletter – May 2018]

Wednesday, May 30th, 2018

[The following article led the May 2018 issue of PSMJ Newsletter. For subscription information or to learn more about the 2018 A/E/C Firm U.S. Market Sector Forecast, go to psmj.com.]

In March 2018, analysts reported that rents were rising nationally at a rate unseen in two years. This could signal an extension of the long bull market for A/E/C firms in this space, as rising rents typically indicate room for growth in new apartment construction. Ostensibly, if landlords can raise rents, then vacancy must be low enough to support these increases without triggering competitive moves such as contract concessions and rent decreases.

By all indications, the multifamily apartment market is still strong. As 2017 turned to 2018, the term “multifamily boom continues” appeared in headlines coast to coast. Record-setting numbers of construction cranes dot the skylines of major metros from Boston to Denver to Seattle, according to Rider Levett Bucknall’s RLB Crane Index.

PSMJ’s 2018 A/E/C Firm U.S. Market Sector Forecast notes that multifamily-for-rent has been a leader among A/E/C firm markets for nearly a decade and is likely to maintain this status through 2018 and beyond. “A joint study by Hoyt Advisory Services, the National Multifamily Housing Council and the National Apartment Association found that the U.S. needs to add 4.6 million apartment units through 2030 to keep pace with population and demographic projections.

“Alex Carrick, chief economist for ConstructConnect, predicts a 28 percent gain in the residential construction market from 2017-2021. Even at this rate, however, the market would still fall short of the 1.4 million units he believes is needed annually to keep up with demand,” the Forecast states.

Despite the positive outlook, the first quarter saw apartment vacancy rates nationally continue the trend of slow, steady upticks, according to real estate data firm Reis. At the same time, while new multifamily permits have eased since the peak in 2015, construction activity remains strong. Contrary to other indicators, this combination often precedes a dip in demand.

Which is it? Does the multifamily market have a few strong years left, or is this the beginning of a hard fall?

One theory is that developers are too focused on luxury properties, leaving low- and mid-range renters with fewer choices and higher payments. While the number of new apartment units set records in 2017, researchers estimate that three-quarters to four-fifths of these were in the upscale category.

This lean toward luxury is driven as much by financial factors as by demand. The increasing expense of land, materials and labor impact construction costs relatively equally across all market segments, so developers are opting for the greater yields and higher values of upscale properties.

This results in low- and mid-range renters taking the brunt of rising costs as demand in these segments outpaces supply. “While the market has responded to rental housing needs for higher-income households, there are alarming trends that suggest a growing inability to supply housing that is affordable for middle- and working-class renters, let alone those with very low incomes,” said Christopher Herbert, Managing Director of Harvard’s Joint Center for Housing Studies, in a CNBC report from February 2018.

In that same report, Toby Bozzuto president and CEO of multifamily management and development company The Bozzuto Group, said residents in his primarily high-end portfolio of 70,000 units spend a relatively low percentage of their income on housing. “It is a tale of two cities,” he adds. “In the middle-income and the lower-income markets, people are spending proportionally more on their rent — so much so I believe there’s an acute crisis headed our way.”

The takeaway is that demand should continue to drive the multifamily market in desirable locations, but that the focus may need to shift toward the middle- and lower-end markets if it is to sustain its roll.– Jerry Guerra

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.

Speaking at the ACEC Fall Convention

Thursday, November 30th, 2017

I recently spoke at the 2017 ACEC Fall Conference in Orlando. The presentation was titled “Top AEC Markets: Sectors, Strategies & Trends for 2018.” The 75-minute talk was at 10 am on Wednesday, October 18, 2017.

The presentation was based on the results from the recently published market research report, “The 2018 A/E/C Firms U.S. Market Forecast,” which was published by PSMJ in November.

ACEC’s 2017 Fall Conference was at Hilton Bonnet Creek & Waldorf Astoria.

The Mysterious World of Wikipedia

Wednesday, February 1st, 2017

From almost its first published article, Wikipedia has been derided as an unreliable, almost laughable source of information. And why not? When the whole world is the editor, how can you have confidence in the veracity of its content?

Personally, as a writer and researcher, I’ve always found Wikipedia to be a valuable, user-friendly source. The key to using it effectively, though, is not to take what’s written in the article text at face value. Every significant fact in a Wikipedia article should be (but often isn’t) supported by a citation or reference of some kind. Without this safeguard in place, “fact” can very quickly become opinion (or worse, falsehood).

For me, Wikipedia is less a source and more a portal to references that often shed significantly more light on the subject. To use Wikipedia correctly as an information source, you need to take this extra step.

For firms with a Wikipedia page, there is some benefit in that these pages tend to appear high in search listings. But the roster of architecture and engineering firms with a Wikipedia page, compared with those lacking one, is as arbitrary as it is confusing. Fairness and logic, at least as it currently stands, are absent from the process.

My life as a Wikipedia editor

I have long been intrigued by the idea of editing content on Wikipedia. Actively participating, with the ability to fix mistakes and add depth to online articles, is an appealing opportunity. So, partly driven by the notable absence of an article on a company that I thought deserved one, I joined Wikipedia as an editor in the summer of 2016.

The subject engineering firm is entitled to a Wikipedia page as much or more than dozens of others I’ve found in the online encyclopedia. It is a mid-sized, independent firm that has been in business for over a century and has worked on many of the most notable and recognizable buildings in the world. Like a lot of engineering firms, they’ve never been big on self-promotion, so they’re far from a household name outside of their niche markets.

Soon I hurtled into the world of Wikipedia like I never expected. I’ve learned a lot, some of which I share here.

Publishing standards are far more stringent than they used to be. In crafting my first article, I relied as a guide on other articles published about similar firms. This was a mistake because the standards for publication have risen substantially in recent years. The other pages I consulted list awards, key individuals and milestones, so I did as well. Many sites also included clearly promotional content such as logos, flowery marketing language and detailed stories of professional success, which I did not. (I wonder how one would even get a company’s logo if it weren’t provided with permission directly by the company itself, which I assume is taboo. This kind of hypocrisy is rampant on the site.) If you find an article in Wikipedia that clearly promotes the company in the same way its website does – often using exactly the same cut-and-paste language – check its history page. You’re almost sure to find that it was originally published five or more years ago.

Wiki administrators guard fiercely against conflicts of interest and the default is apparently NOT to give the benefit of the doubt. My level of caution in trying to avoid marketing-like content wasn’t nearly enough. I wrote my article in a draft site and, after several weeks of occasional writing, researching, editing and referencing, felt it was ready to go live. I published it by following the online wizard and felt pretty good about it. It didn’t last three hours. One administrator made a few changes and kicked it back to draft status. This was fine because, as I know now, it really wasn’t ready for prime time. Several administrators also leaped to the conclusion that I had a conflict of interest and had somehow misled them about my intentions. This even though I clearly reported my interest in and involvement with the industry. Otherwise, how could I write with any confidence or authority about the subject? This is the most maddening part of my experience.

Less is often more. Strangely, my biggest mistake was being too thorough. I ended up with 70 references, two long tables (for projects and awards) and lengthy descriptions about the company’s achievements. I did this because I had seen it elsewhere, and also because I thought it would add credibility to the page. I had dozens of references to other Wikipedia pages, along with the independently sourced citations that supported my facts. Yet, to some editors, this “excess detail” was a red flag that they interpreted as being promotional. What I intended as verification, they saw as advertising.

They call them “articles,” but “entries” would be more accurate. At least as defined today. Wikipedia has many advisory pages that try to guide new editors through the process. However, much of it is confusing and until you leap in, you’re likely to trip up. One thing that stuck with me, though, is the admonition that Wikipedia is not journalism, but an encyclopedia. So, instead of “article,” they should say “encyclopedia entry.” It’s a subtle difference because neither should include the author’s or editors’ opinions. The distinction, as I see it, is that a journalistic article can connect the dots to reach a conclusion or summation, while an encyclopedia entry is just the facts.

Becoming an editor and doing light editing is simple; publishing a new page is not. If you can edit in Microsoft Word, you can be a Wikipedia editor. Operate in the source code or choose a WYSIWYG (what you see is what you get) function. But the options for publishing a new page are multiple and, at least initially, confusing. While I don’t think anyone has ever reviewed an edit I’ve made on an existing page, the first full article I tried to publish was stomped on by multiple admins within a few hours.

On some levels, Wikipedia has developed into a subculture with its own language and protocols. Wikipedia administrators communicate using myriad codes, acronyms, abbreviations and other jargon and tools. I constantly find myself having to look up a reference that I don’t recognize or understand. I often travel two or three reference pages in and still don’t understand some aspect of what’s being said. I assume this special language was developed to simplify things for editors and admins, but instead it effectively excludes the uninitiated in the same way that lawyers and politicians do with their insider talk. With this obstacle in place, it becomes impossible for newcomers to fully grasp the long-established, often shadowy set of policies and procedures that have developed over time in the Wikipedia community.

Contributing to Wikipedia has its rewards and excitement, but may not be worth it. Ultimately, Wikipedia is a fascinating, impressive and valuable resource for all of us. For years, I’ve seen – and wished I could correct – errors and out-of-date references on Wikipedia pages. Now I am perpetually logged in, so anytime I see something that should be changed, I can and do change it. For this reason, I’m glad I chose to sign up. However, it seems that the effort to prevent against conflicts of interest and blatant promotion – real or perceived – has pushed beyond the point of reasonableness to where it could easily become a detriment to the recruitment of new authors, editors and administrators. Wikipedia’s mission is to create a community project, but some currently in positions of power seem determined to limit the size of that community. Personally, where I was once excited to contribute as much and in as many ways as I can, I’m now frustrated with the process and wary of wasting more of my own time than I already have.

So how do you publish a Wikipedia page? Unfortunately, I don’t know the answer. It takes only a brief review of what is and isn’t covered by Wikipedia to see that there is no clear standard of what is worthy of publication. It is as much (or more) about when you published as it is what you publish – and, in some cases, who is doing the publishing. It is a supremely subjective process with elements of luck, timing and knowledge of the process as the primary determinants. A company may deserve an article as much or more than a peer that already has one, but this is no guarantee that it will pass muster with the Wikipedia watchdogs – especially if they sense even the remotest possibility of self-interest.

If you still want to place your article among the 5-plus million already available on English Wikipedia, here are some options:

Request a new page: Wikipedia offers the opportunity to include your proposed topic in a list of articles requesting to be written. The theory is that someone looking to contribute will pick up the idea and run with it. The truth is, there are thousands of articles on this list and absolutely no guarantee (and possibly little likelihood) that someone will randomly choose to fulfill your request. It seems that some of these pages have wallowed in the request pile for years. If you choose, you can access it here: https://en.wikipedia.org/wiki/Wikipedia:Requested_articles

Hire a freelancer to write it: You can find websites advertising freelancers who can write and publish a Wikipedia page for you. Rates vary widely – a quick look found a range from $25-$100 per hour. Based on my experience, I can only surmise that these people either have a way of surreptitiously disguising the fact that they’re being paid to contribute to Wikipedia, or they somehow know how to fly under the radar. I hate to think it’s anything more insidious than that.

Become an editor and figure it out for yourself. Based on my experience, I imagine this takes a lot of time and practice. The experience of trying to publish a page left me with more questions than answers. Maybe you’ll do better. The one thing I know for sure is that there is a lot more that I don’t know.

I’m not sure my first article will ever see the light of day and, if it doesn’t, that will be a shame. A deserving firm won’t have a Wikipedia page and I will have wasted a lot of time I really don’t have to waste. That said, this firm has operated successfully and independently for more than a century without a Wikipedia page. They probably couldn’t care less whether they have or don’t have one. And I’ve lived all but six months of my life without being a Wikipedia editor, so I suppose I could survive without it as well.

P.S. – I did publish a second article, shorter, but similarly structured and written. It is about a former employer who was acquired and is no longer a separate going concern. An admin made some minor edits, but otherwise, no problem at all. Go figure.

Market Research Words to the Wise

Tuesday, April 5th, 2016

My good friend and frequent collaborator Richard Friedman asked if I’d like to contribute an article to his excellent publication, The Friedman File.  The article, published today, is below. For a sample of Rich’s own Words of Wisdom, visit friedmanpartners.com.

In many AE firms, market research is a wasted activity driven by ignorance, cursed by laziness and devoid of any understanding of where its true value lies. The inevitable result is a massive gap between the promise of an intelligent market research program that helps a firm succeed and grow, and the reality of market research as it is practiced by most firms today.

We pay for expensive online services, scour the business papers and trade journals for long-range leads, hire ex-government employees to identify and harvest opportunities, sit through economic outlook presentations that may or may not relate to what we do and purchase detailed reports that give us macro views on a number of markets (some of which we care about).

We may even cobble together an RFP to retain a consultant for targeted research on a client sector or region. Then we wipe our hands, pat ourselves on the back and return to whatever it is we were doing before this unfortunate distraction drew our attention away from the things we really want to do.

What happens to all the research data we acquire through these various methods? If you’re like a lot of firms, it goes into a nicely organized, thoughtfully designed spreadsheet. And it sits. Waiting for something to happen. Forever.

So what’s the answer? Should you just forget about market research altogether?

Truthfully, if you’re investing time, money and effort into collecting market research data that you’re just going to dump into a black hole of inertia, yes. But there’s a better way.

With the help of some of history’s words of wisdom, here are three tips to ensure that your market research yields value and contributes to the bottom line.

1. “It’s not what you look at that matters, it’s what you see.” —Henry David Thoreau

A mid-sized engineering firm seeking to increase its success in local municipal markets recently subscribed to an online lead-generating service. Their admirable goal was to get ahead of opportunities so they could build the appropriate relationships and prepare for projects long before the RFP hit the street.

The service they selected, like most of its peers, is a wonderful tool packed with a seemingly endless supply of pertinent opportunities across all public-sector markets and service areas. It was almost more than this firm could handle.

Actually, it was more than they could handle.

You see, they had no system in place to efficiently collect, assess, absorb and disseminate the daily information downloads the system provided. After two years of very little usefulness, and over $13,000 in fees, the service was discontinued and deemed a failure.

It wasn’t the service’s fault. Without someone on staff dedicating a substantial amount of time every week to optimizing its use, it never had a chance. Even more, because this firm had not yet implemented a robust customer relationship management (CRM) system that could have allowed efficient distribution, discussion and follow-up, the campaign was doomed to fail.

2. “The only freedom (that) deserves the name is that of pursuing our own good, in our own way.” —John Stuart Mill

Another sure path to failure is assigning people to lead a market that doesn’t interest them. Turning that around, the best chance for market research to succeed is under the enthusiastic eye of a “champion” who volunteers for the role and is driven to see it through.

Developing market champions is a common goal in strategic planning, and with good reason. They are the best hope for firms pursuing any market, particularly new and emerging ones. The mistake we often make is identifying the desired market (round hole/cart) and then forcing someone in the firm to be the champion (square peg/horse).

Instead, offer a roster of viable opportunities to a controlled group within the firm, including “future leaders,” and encourage champions to step forward in a sector they’re jazzed about.

Then, when one or more do, give them the leeway and tools to ride it through. Don’t expect the 85% billable rising star Associate to lead you to a new-market promised land without shaving at least 20% off her utilization goal. You can assume some additional commitment from your new champion, but the company needs to give a little, too.

With a willing, invested leader in place, you can have confidence that the market research data you accumulate from any number of sources – including the afore-mentioned online service – will be promptly and appropriately vetted and acted upon.

3. “The trouble with most of us is that we would rather be ruined by praise than saved by criticism.” —Norman Vincent Peale

Whether you’re collecting client feedback data or assessing your likelihood of success in a target market, unvarnished honesty is the best policy.

In the former case, clients asked for feedback should have to struggle to give praise without some type of constructive criticism. “Keep up the good work,” is nice, but helps no one.

Instead of “Did we meet or exceed your expectations,” ask, “What could we have done better to make your project or your experience more successful?” If you want a testimonial, ask for it. Otherwise, force your client to tell you something useful, even if it’s negative. Especially if it’s negative.

In a similar vein, when reviewing market data for strategic decision-making, the career naysayer may be your most valuable asset. As long as this devil’s advocate doesn’t hijack the process and his negativity is kept in check, the exercise of countering his prophecy of doom with a logical and well-supported argument could be enlightening. Ideally, the debate either strengthens your resolve or helps you avoid a potentially devastating mistake.

The Bottom Line

Performing market research for its own sake is a fool’s errand. Before you invest an iota of time or a nickel of your operating budget on market research, consider what you’ll do with the information you receive, who’s going to do it, and how it may influence your future success. Critical to this judgment is ensuring that it is performed within the context of the firm you really are, not the firm you wish you could be. — Jerry Guerra, April 5, 2016

P3s: Trending in America

Wednesday, December 16th, 2015

Cottage industries are springing up around one of the hottest topics in the infrastructure business – public-private partnerships. Also known as P3s and PPPs, this project delivery method is quickly gaining steam in the United States after rapidly consuming much of the market overseas and in Canada.

During my three years with the legendary engineering company Fay, Spofford & Thorndike, we invested a lot of time, money and effort into ensuring that we didn’t let this trend pass us by. In fact, FST’s acquisition by Stantec in October was driven partly – maybe largely – by the need to have sufficient resources to capitalize on P3 opportunities.

One of FST’s recent signature projects – the study of a third crossing over the Cape Cod Canal – has been discussed as a possible P3. Other projects in FST’s wheelhouse, such as the reconstruction of sections of Route 3 South going to the Cape, are also on the Massachusetts Department of Transportation’s short list of potential P3s.

Our research and insight came from a variety of sources. We were long-time subscribers to the UK-based P3 Bulletin, which delivers daily news item electronically and a monthly hard copy magazine. I personally attended the P3 Hub South Conference in Richmond, Virginia, in 2014 and the National Council for Public-Private Partnerships (NCPPP) Federal P3 Summit in Washington, D.C, in February 2015.  In July, FST’s Director of Transportation Bill Reed and I attended the P3 Connect Conference at the Westin Copley Hotel in Boston, which was also sponsored by the NCPPP. (For those who think P3s are a new phenomenon, consider that the NCPPP is celebrating its 30th year in existence.)

This investment gained us a far greater understanding of the potential, and more importantly, the reality of P3s in America. Like many trending issues, people can become intrigued with P3s before they fully understand all that they entail.

If there is anything we have learned from keeping abreast of P3 news and attending these events it’s that P3s can be an outstanding way to ensure that a needed project is financed, designed and built cost-effectively, in a reasonable time and with a high level of quality. However, as with every so-called alternative delivery method, only certain projects lend themselves to the P3 approach.

Here are some other thoughts about the state of P3s in the United States as we move toward 2016.

P3s introduce parties that engineers are not used to dealing with, even on design-build and other alternative delivery methods. The attendee list at a P3 conference is very different from most of the ones we attend in the AEC industry. It’s a far more mixed bag of companies and professions. You’ll find a much higher representation of the financial and legal professions than you would at an ACEC or APWA conference. Understanding the motivation and role of these non-traditional members of the project team is crucial for engineering firms interested in getting into the P3 game.

P3s are not only for transportation infrastructure projects. The perception that all P3s are massive highway and bridge projects ignores the fact that most P3s occurring in the United States in 2015 are vertical projects such as military barracks, dormitories, government buildings and water or wastewater facilities. One of the most innovative P3 projects currently underway is a stormwater management project for Prince George’s County in Maryland.

P3s in transportation are not all about toll roads and bridges. Another misperception is that all transportation P3s are funded by user fees (i.e., tolls).  Now, government agencies rely more on “availability payments” from traditional funding sources such as grants, loans and tax revenue to compensate the private-sector financial partner.

For example, the Port of Miami Tunnel Project, one of the country’s highest-profile P3s, uses availability payments. According to the official project site, under the concession agreement, Florida DOT will make milestone payments to the concessionaire during the construction period, upon the achievement of contractual milestones. Once the construction is complete, the department will then make availability payments to the concessionaire.  The state is paying half of the $668.5-million cost, with Dade County and the City of Miami splitting the other half. These payments will be contingent upon actual lane availability and service quality. The tunnel will be returned to FDOT at the end of the contract in October 2044.

While we still have a long way to go before P3s are as common here as they are in many other countries, state legislatures continue to pass laws that remove barriers to P3s. Interest among international companies in the U.S. P3 market is growing, to the point where Moody’s Investor Services has said that the U.S. is poised to become the largest market for P3 projects in in the world.

Why wouldn’t we? The new federal highway funding legislation passed this month is a step toward stability in that it allows state DOTs to do more and better long-term planning. However, the $305 billion in the five-year bill – about $225 billion reportedly for highways – still comes up short of all the needs. Also, the highway trust fund grows more obsolete by the day as a way to pay for transportation infrastructure improvements. Agencies at all levels will increasingly include the P3 option as they seek solutions to transportation infrastructure challenges.

Social P3s are also primed for growth. Vanessa M. Leiby, executive director of the Water and Wastewater Equipment Manufacturers Association, wrote in the March 2015 issue of Water & Wastes Digest, “The extent to which the federal government has begun encouraging and facilitating such ventures is notable. It appears P3s will play a large role in the future of water and wastewater infrastructure funding.”

As it is with many recent developments in our industry – be it technology-driven advancement such as Building Information Modeling or the latest in project financing or project delivery – P3s are outside the comfort zone of most traditional engineering companies. At FST, we chose to accept and embrace these changes with the goal of succeeding where others may have failed to even try. – Jerry Guerra, December 16, 2015

Midyear Update in SMPS Marketer

Tuesday, June 18th, 2013

The June 2013 issue of marketer, the journal of the Society of Marketing Professional Services (SMPS), features a midyear assessment of the AEC industry based on The JAGG Group’s latest publication, The 2013 Guide to the U.S. AEC Markets. If you’re interested in receiving a free copy of the midyear report on which the article was based, send an email to research@jagg-group.com.

Ranking 40 Markets for US AEC Firms in 2013

Wednesday, January 9th, 2013

The JAGG Group’s 2013 Guide to the US AEC Markets ranks this year’s outlook for 40 markets served by architecture, engineering, environmental and construction companies, supported by more than 150 pages of analysis and insight from experts, practitioners and economists. Point totals are tallied based on a weighted scale that assesses the size of the market, potential short- and long-term growth and a variety of miscellaneous factors.

2013
Rank
    Market
    Sector
Total 
Points
1     Apartments 72
2     Natural Gas 71
3     Senior Housing 61
4     Transmission/Distribution 60
5     Health Care 58
6     Hospitality 49
7     Solid Waste 41
8     Manufacturing 40
9     Industrial/
    Warehouses
39
10     Retail 38
11     Hazardous Waste 37
12     Single-Family Housing 35
13     Heavy Rail 34
14     Water Supply 33
15     Ports and Shipping 32
16     Wastewater
    Treatment
30
17     Transit 29
18     Aviation 28
19     Solar 27
20     Higher Education 26
21     Roads and Bridges 26
22     Office 24
23     Research &
    Development
23
24     Biopharma 22
25     Condos and Townhomes 21
26     K-12
    Education
20
27     Data Centers 19
28     Life Sciences 18
29     Wind* 17
30     Geothermal and Other
    Renewables
16
31     Testing &
    Analysis
15.5
32     Air Pollution
    Control
15
33     Stormwater
    Management
14
34     Religion 13
35     Coal 12.5
36     Amusement &
    Recreation
12
37     Government Buildings 11
38     High-Speed
    Rail
10
39     Nuclear 7
40     Brownfield Development 5
*This table was tallied prior to the fiscal cliff deal that extended the Production Tax Credit for wind. For this reason, the wind market may have a better year in 2013 than predicted, though the threat of the PTC expiration will limit growth, especially in the long term.

For more detail about why these markets are ranked where they are, purchase The 2013 Guide to the U.S. AEC Markets by clicking on the link at the top right and paying with a credit card through our secure PayPal site. Within one business day, you will receive a pdf copy of our 270-page report to your requested email address. The Guide comes with a full money-back guarantee.

Apartments, Natural Gas, Senior Housing, Transmission/Distribution top 2013 AEC Markets

Tuesday, December 11th, 2012

New Report Predicts Strongest, Weakest 2013 AEC Markets

MEDIA RELEASE: December 11, 2012

Two of the top three markets identified in The JAGG Group’s 2013 Guide to the U.S. AEC Markets as the most promising of 2013 are no surprise – apartments and projects related to natural gas development have carried the industry along for months, if not years. However, the third in that group may turn a few heads.

In naming Senior Housing the third most-promising market for AEC firm work in 2013, The JAGG Group reports, “The inescapability of demographics, combined with low levels of building for a prolonged period, have brought the senior housing market back in vogue. High occupancy rates, rising home prices and lagging supply also contribute to the resurgence.”

Despite a tapering off of the market’s construction activity in the latter half of 2012, The JAGG Group’s 270-page market outlook predicts a renewed focus on investment in senior housing development in 2013. This view, while likely unexpected to some, is supported by comments from industry insiders at the annual conference of the National Investment Center (NIC) for the Seniors Housing & Care Industry in September.

Bill Kauffman, senior research analyst for NIC, told Senior Housing News, “There’s chatter about new construction and lenders being extremely busy. Talking to lenders, they say they’re very busy with underwriting new construction loans.”

Another factor that could potentially drive the industry is acquisition. More than two-thirds of senior housing and care industry executives say that mergers and acquisitions are their primary growth strategy for 2013. This could eventually lead to design and construction work on rehabs and renovations.

Fourth on The JAGG Group’s list is the transmission and distribution market, for which the comprehensive research book notes, “The high ranking is for short-term prospects in 2013, as well as longer-term possibilities through at least 2015. The needs are great and it’s not a market that can be ignored.”

In all, the newly released annual market guide ranks 40 U.S. markets served by architecture, engineering, environmental consulting and construction firms. The book also includes sections on what the results of the 2012 election mean to the industry, an update on 10 top trends in 2013, a look at international markets, and much more. 

For more information on The 2013 Guide to the U.S. AEC Markets or to purchase this strategic planning tool from the publisher, visit their blog at http://www.aecinsight.com or email to research@jagg-group.com. You can also find links to more information on Twitter @aecinsight.