Prices for numerous construction materials have risen recently. The national average retail price of on-highway diesel fuel hit a 17-month high of $3.07 per gallon today, up 84 cents (38%) from a year ago, the Energy Information Administration reported. The agency "projected annual average retail diesel fuel prices...at $2.95 and $3.12 per gallon in 2010 and 2011, respectively" in its April 6 Short-Term Energy and Summer Fuels Outlook. The New Mexico Department of Transportation announced on Tuesday that its liquid asphalt rack-price index for May would be $659, the fourth monthly increase in a row and $116 (21%) higher than in May 2009. A N.M.-based contractor on April 5 sent AGC a list of April price increases ranging from 2% to 15% that it had received from a variety of plastic, copper and brass plumbing suppliers. Purchasing managers at nonmanufacturing firms in March reported price increases for copper fittings and products; diesel fuel; drywall/gypsum board; metal studs; roofing shingles; steel pipe fittings and products but lower prices for construction labor, the Institute for Supply Management said on April 5.
Recent construction materials price increases may not continue, however. "Wallboard prices are likely to end this year with an overall 6.7% decline before turning up 4.6% in 2011, followed by another 4.5% gain in 2012, according to [Armine] Thompson" of economic consulting firm IHS Global Insight, Engineering News-Record reported on March 29. "'Copper and aluminum prices have moved way ahead of market fundamentals,' says John Mothersole [of IHS]. 'We don't think the end markets, especially in the U.S., are strong enough to accept these...price increases, and weak demand will start pushing back during the next two quarters,' he says....Structural-steel prices now are hovering around their 2004 to 2006 levels, according to John Anton [of IHS]. But even those price levels may be too high. 'I don't see how low worldwide demand can support these prices....Scrap prices have gone crazy since late 2009....But once inventories are restocked, I think we will see prices fall back off.'" In the same issue, ENR reported, "Per square foot, window-wall and curtain-wall prices are down as much as 10% over already low prices at this time last spring, say glaziers across the country....'As the nonresidential construction market continues to contract through the rest of 2010, we expect flat-glass prices to continue their downward trend' by 3.5% before rebounding in 2011 if a nonresidential rebound takes hold," Thompson said. "Prices for aluminum [showed] signs of a tepid recovery this quarter [but] an 'excess supply amid an extended period of weak demand is going to provide fundamental resistance to higher prices,' says Justin Lennon, analyst at New York-based Mitsui Bussan Commodities."
"Average net rents nationwide in the office sector, the largest segment of commercial real estate, fell 0.8% in the January-to-March period compared with the prior quarter and were down 7.4% from the same period a year ago," the Wall Street Journal reported on April 5. "Of the 79 markets that [market researcher Reis Inc.] tracks, rents were stable or rose in 23 markets. That was a vast improvement over the fourth quarter of 2009, when rents fell in 70...The office vacancy rate, meanwhile, rose 0.2 percentage point...to 17.2%." Rising rents and falling vacancy rates are generally needed to support new construction. "Average lease rates at shopping malls during the first quarter were...down 3% from a year earlier," the Journal reported on Tuesday, citing Reis, "the sixth consecutive quarterly decline. Lease rates at shopping centers, which are smaller than malls, [were] down 1% from the prior quarter and down 3.4% from a year earlier," the seventh consecutive quarterly decline. "Vacancy rates at malls in the top 77 U.S. markets rose to 8.9%..., up 0.1% from the previous quarter....One reason why rising vacancies have started to slow is because discount stores are rapidly expanding, including Dollar General, electronics chains like hhgregg Inc. and apparel stores like Forever 21 Inc....Vacancies at shopping centers in the top 77 U.S. markets increased to 10.8% in the first quarter, up 0.2 [percentage point], the highest vacancy rate since 1991." The Journal reported on Wednesday, "Apartment rents rose during the first quarter, ending five straight quarters of declines...Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis...began its tally in 1980." Rents rose in 60 of the 79 top U.S. markets, "led by Miami, Seattle and New York-all cities that have notched big rental declines in the past year....Nationally, effective rents...rose 0.3% during the quarter compared with a 0.7% decline in the fourth quarter of last year and a 1.1% drop in the first quarter of 2009....Difficulty in obtaining financing for new apartment construction, meanwhile, has limited the supply of new units that will added in the coming years....Barely half of the 22,000 units in buildings that opened their doors last quarter were filled, and landlords may cut deals because they face deadlines to pay back construction loans....Portland, Oregon, posted the largest rent decline, at 0.7%, followed by Las Vegas, San Diego, and Southern California's Inland Empire....South Florida, meanwhile, appears to show signs of stabilizing...Rents gained 1.1% in Palm Beach and 0.8% in Tampa-St. Petersburg."
Unemployment rates were higher in February than a year earlier in 347 of the 372 metropolitan areas, lower in 21 areas and unchanged in four areas, the Bureau of Labor Statistics reported on Wednesday. Among the 371 metro areas for which nonfarm payroll employment data were available, 343 areas reported over-the-year decreases in employment, 26 reported increases, and two had no change. AGC calculated that construction employment rose in 10 areas out of 337 for which data was available, fell in 315 and was unchanged from a year earlier in 12
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