Even with the surprisingly strong fourth quarter for contracting, most involved in the construction industry will find 2014 a bit disappointing when the dust settles (especially when the financials are reported). That will be less because of the performance of the market than the underachieved potential.
The last quarter of 2013 showed real economic promise. National GDP was up 3.7% and job creation in Pittsburgh was estimated at 18,000 jobs for the year. That potential for loosening the market just didn’t kick in during 2014. Or at least it didn’t feel that way. The numbers mostly back up that disappointment, although they tell a mixed story.
Non-residential structures totaled $2.77 billion in 2014. That’s a mere $5 million below the $2.82 billion of 2013 but given the outlook coming into 2014, flat was disappointing. The residential market may appear way off the 2013 levels, falling over 24% year-over-year. But much of that decline is due to a 30% drop in multi-family starts to 2,572 units. That’s actually a pretty healthy year in Pittsburgh but the 2013 total of 3,838 dwarfs that number. It’s worth noting that the 2013 total was a 239% increase over 2012 and 2,572 units tops every other year going back to 1995 by at least 15%. More about the apartment market in a future post.
|Total Pittsburgh MSA 2014
|Total Pittsburgh MSA 2013
There were over $900 million in non-residential starts in the 4th quarter of 2014. That’s a good start for backlogs. While the bid market isn’t racing out of the chute in the first 2 weeks of the year, more than $250 million has already been awarded or started already in 2015.
Last week NAIOP Pittsburgh presented PNC’s Gus Faucher talking about the economic outlook for 2015. Faucher was very upbeat, mostly because of the improved job market, lower gas prices and the lack of any economic headwinds from consumer or government de-leveraging. PNC is predicting GDP growth above 3%, even with the global economy tanking. It’s worth pointing out that PNC’s Kurt Rankin was the one economist willing to say that he thought surprises in 2014 would be to the upside and he turned out to be very accurate in guessing what those upside numbers would be.
Business wasn’t as bad in 2014 as it felt. One of the tougher tasks of business is separating emotion from reality and that cuts both ways of course. My forecast for 2015 is that it will be a breakout year. That doesn’t mean gangbusters necessarily. I think too much Pittsburgh business is tied up in global business for the Pittsburgh economy to not be impacted a little by the world’s problems. But I do think that 2015 will be the year that we see the long-term optimism about Pittsburgh and its maturing technology and energy industries translate into bricks and mortar.