Health care, reconciliation bills have mixed construction impact; recruiters are upbeat

On Thursday, Congress completed action on a reconciliation bill that modifies the newly enacted health care legislation and also replaces private lending for college student loans with direct lending from the U.S. Department of Education. President Obama is expected to sign the bill on Tuesday. The reconciliation bill eliminates the discriminatory definition of small construction employer, defining all small employers as firms with 50 or fewer full-time equivalent employees. "Health-care real estate players unanimously agreed that the new law would sooner or later result in increased demand for both on- and off-campus outpatient medical office buildings (MOBs)," In the Pipeline, an online newsletter from real-estate research firm CoStar reported on Thursday. "Other potential impacts mentioned by health-care property professionals include the following: The bill places limits on new or expanded physician-owned hospitals, a major source of health care development in some parts of the country, including the fast-growing Texas market....Charitable hospitals face more verification and accountability for the "community benefit" they provide in exchange for their tax-exempt status, possibly translating into demand for off-campus facilities. Nearly 60 million square feet of new medical office supply could eventually be built to meet the demand, based on a standard industry multiplier of 1.9 square feet of new MOB space for each new outpatient brought into the system, according to Jeffrey H. Cooper, executive managing director with global real estate services firm Savills LLC in New York. While not everyone completely agrees with that formula, virtually all said that developers are among the likely winners. Most of them also agreed that hospital systems will benefit, at least in the short run, as more insured patients come into the system and help offset the costs of treating uninsured people who lack the means to pay." One contractor said the student loan provision led an education company to cancel an office project. "Recruiters are reporting the strongest monthly job gains since the start of the recession," Econoplay.com reported on Friday. "Almost all staffing executives contacted reported a substantial jump in March job orders over February...The resurgence is broad, spanning most regions (even Detroit!) and touches almost every industry segment but commercial construction (and, even there, some see brighter days ahead). Commercial construction jobs are only as vibrant as stimulus money allows, said Dan Conroy of the Conexco Group in St. Louis, specializing in construction executive recruiting. 'Things are starting to pick up a little bit. But you have to really pick your spots and stay away from private commercial work,' Conroy said. 'There's nothing going on in the private sector. It raises the question of what will happen when stimulus spending goes away.' There is activity in environmental areas related to stimulus spending, including wastewater treatment and clean energy. 'Schools are still being built, but that too is stimulus spending,' he said. He does think the commercial construction layoffs are played out, and the jobs bill 'can't hurt because a lot of it will be construction.' Bill Stynetski, president of HardHatJobs in Dallas, also into commercial construction executive search, sees 'very little' in the way of construction recruiting. Excavation is picking up for highway work, airports, and seaports thanks to stimulus money. But commercial, office building, hotels, and retail are still slow." Seasonally adjusted unemployment rates increased from January to February in 27 states, decreased in seven states and the District of Columbia, and remained unchanged in 16 states, the Bureau of Labor Statistics (BLS) reported on Friday. Compared to February 2009, jobless rates increased in 46 states plus D.C. and declined in four. For the month, nonfarm payroll employment decreased in 27 states and D.C. and increased in 23 states. Compared to a year earlier, employment decreased everywhere except in Alaska (+900 jobs or 0.3%) and D.C. (1,600 jobs or 0.2%). For the month, seasonally adjusted construction employment increased in 12 states, decreased in 34 plus D.C., and was unchanged in Idaho, Rhode Island and South Dakota. Compared to February 2009, construction employment rose in Alaska (100 jobs, 0.6%) and fell everywhere else. The largest 12-month percentage declines were in Nevada, -28%; D.C., -25%; Missouri, -22%; Colorado and Arizona, -21% each. (BLS combines data for construction, logging and mining in D.C. and six states.) The fastest-growing metropolitan areas from July 1, 2008 to July 1, 2009 were Hinesville-Fort Stewart, Georgia, 5.9%; Kennewick-Pasco-Richland, Washington, 3.6%; Raleigh-Cary, North Carolina, 3.2%; Austin-Round Rock, Texas, 3.1%; and Grand Junction, Colorado, 3.0%, the Census Bureau reported on Tuesday. Growth exceeded the national rate of 0.9% in 148 of the 366 metro areas, ranged from 0.1% to 0.9% in 164 areas, and was 0 or negative in 54 areas. Over time, rapid growth rates can indicate rising demand for residential, school, retail and other categories of construction. The Architecture Billings Index, a measure of the number of architecture firms reporting higher or lower billings compared to the prior month, moved up two points in February to 45 but remained below the breakeven level of 50. All four practice types reported similar scores: residential, 47; institutional, 44; commercial/industrial and mixed, 43. "About 22% of all architecture firms report having received funding for projects under the federal stimulus program, while an additional 17% of firms that have received inquiries but haven't had funded projects. Even those firms with funded projects or possibilities for stimulus projects this year feel that they will not have much of an impact on firm revenue. Of the 36% of firms that expect to see some stimulus-funded projects this year, 60% anticipate that these projects will account for under 5% of firm billings this year, and another 24% expect that they will total between 5% and 10% of total revenue."