NOVEMBER

newsouthsupply

1611-consupdate

NOVEMBER, 2016

CONSTRUCTION UPDATE

News From the Month of October 2016

CONTENTS

U.S. Economy ................................. 2

Economic, transportation and general construction

news and insights

Nonresidential Construction ............... 5

Overview and sector news and projects for the nonresidential,

commercial and institutional construction markets

Heavy Construction……………………… 8

Overview and news on roads, bridges, airports, water

and civil construction

Residential Construction ………………. 9

Overview and news on the housing market and singlefamily

and multifamily construction

Commodities ……………………………. 11

Steel, concrete, oil and lumber news

OVERVIEW

& MONTHLY

STOCK

MARKETS

Construction spending fell in September, but spending for July and August was revised up. The unemployment

rate dropped to 4.9%% and the economy added 161,000 new jobs. Q3 GDP growth was better

than expected and the Fed held interest rates steady. Gas prices were unchanged, but diesel prices

rose. Durable goods orders and the Chicago PMI dropped, and wholesale prices rose. Consumer Confidence

fell, while consumer prices and consumer spending rose. Housing starts and builder confidence

fell; mortgage rates were flat, and building permits and new and existing home sales rose. October is

typically the month with the most volatility and biggest losses of the year, but this October losses were

modest. The DOW shed 0.9% for the month to close at 18,142, the NASDAQ lost 2.3% to close at

5,189 and the S&P, the index most closely followed by economists, fell 1.9% to 2,126.

CONSTRUCTION

SPENDING AT

A GLANCE

September 2016

% Change

In Millions of U.S. Dollars from September 2015

Total Starts $45,250 -0.6%

Residential $18,836 -1.2%

Single-family $15,092 -2.8%

Apartment/condo $3,744 5.7%

Commercial $7,357 -2.6%

Industrial/Mfg. $440 21.2%

Institutional $7,268 1.4%

Total Non-Res Building $15,614 1.4%

Heavy Construction $10,801 -2.4%

Data Source: CMD Group

SIMPSON STRONG-TIE COMPANY INC. 5956 W. Las Positas Boulevard Pleasanton, CA 94588 U.S.A. 800-999-5099


CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 2

U.S. ECONOMY

Construction Spending

Construction spending fell 0.4% in September to $1.15 trillion,

0.2% below September 2015. Economists had been

expecting construction spending to rise 0.4%. Spending for

July and August was revised up. August spending dropped

0.5% rather than the originally reported 0.7% decline. July's

numbers were revised to a 0.5% gain from the previously reported

0.3% decline. Private spending fell 0.2% in September,

with residential spending rising 0.5% but spending on nonresidential

projects sinking 1%. Overall public construction spending

fell 0.9%. Construction spending has been surprisingly

weak this year, particularly in home building. Overall spending

for the first nine months of the year is 4.4% higher compared

with the same period in 2015.

Truck Tonnage Index Falls

The American Trucking Associations’ advanced seasonally

adjusted (SA) For-Hire Truck Tonnage Index fell 5.8% in September

to 132.7 after rising a downwardly revised 5% in August.

The all-time high for the index was 144, reached in February.

Compared with September 2015, the SA index fell 0.7%

after rising 5.2% in August. It was the first year-over-year decline

since October 2015. Year-to-date, compared with the

same period in 2015, tonnage was up 3%. The not seasonally

adjusted index, which represents the change in tonnage actually

hauled by the fleets before any seasonal adjustment, equaled

136.4 in September, 5.1% below August. The ATA says that

they see a softer than normal freight environment, which is

likely to continue until inventory correction is complete. Based

on the slow growth of the economy, they don't expect truck

tonnage numbers to rise strongly in the near term. Trucking

serves as a barometer of the U.S. economy, representing 70.1%

of tonnage carried by all modes of domestic freight transportation,

including manufactured and retail goods. Trucks hauled

nearly 10.5 billion tons of freight in 2015. Motor carriers collected

$726.4 billion, or 81.2% of total revenue earned by all

transport modes.

Gas Prices Unchanged, Diesel Rises

Gasoline prices were unchanged in October, and diesel prices

rose. The average cost for a gallon of gas remained $2.24

at the end of October but was up $0.02 from October 2015, the

first year-over-year increase this year. As usual, gas was most

expensive on the West Coast at $2.68 per gallon and cheapest

on the Gulf at $2.06. The average cost per gallon for diesel rose

to $2.48 at the end of October from $2.38 at the end of September

but was down $0.02 from October 2015. Prices were highest

in California at $2.83 per gallon and cheapest on the Gulf at

$2.35. The cost of crude oil made up 47% of the cost of a gallon

of gas and 43% of the cost of a gallon of diesel.

DAT Freight Volume Index

Truckload freight availability rose 12% in September

compared to September 2015, as the number of loads on

the spot market surpassed same-month levels from the

previous year for the second consecutive month according

to the DAT North American Freight Index. Dry van and reefer

van freight increased by 33% and 27%, respectively, but

flatbed freight volume slipped 13% compared to September

2015. Flatbed volume has declined on a year-over-year basis

for the past 15 months due to a downturn in the economic

sectors, including oil and gas, that produce flatbed

freight. Spot market freight volume, which typically drops in

September, edged up 0.6% to the second-highest level this

year. A 2.7% increase in van freight volume was responsible

for the month-over-month growth, as reefer volume dipped

1.1%, and flatbeds lost 1.9% in September compared to

August. The increase in van freight volume boosted spot

market rates by 1.4%, and reefer rates added 0.6%. September

flatbed rates declined 1.2% compared to August,

which is more representative of the typical seasonal pattern.

Year-over-year, the average line haul rate fell 6.0% for vans,

4.5% for reefers, and 7.8% for flatbeds. The average fuel

surcharge, a component of the total rate paid to carriers, fell

9.1% from September 2015, contributing to further declines

in carriers' total revenue per mile. The surcharge is pegged

to the retail price of diesel fuel.

SIMPSON STRONG-TIE COMPANY INC. 5956 W. Las Positas Boulevard Pleasanton, CA 94588 U.S.A. 800-999-5099 www.strongtie.com


CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 3

Truck Transit on the Rise

Railroads lost cargo to trucks in the third quarter as demand

dropped for coal, oil and metals. Intermodal cargo,

which is goods hauled in containers, fell for the the second

consecutive quarter, the first time intermodal has dropped

for two consecutive quarters since 2009. A surplus of trucks

has pushed down freight rates and lower diesel prices have

made a dent in rail’s normal fuel-saving advantage and halted

what has been steady growth for the rail sector.

Consumer Confidence Drops to 98.6

The New-York based Conference Board’s Consumer Confidence

Index dropped to 98.6 in October after rising to a

downwardly revised 103.5 in September as consumers were

generally less optimistic than they’d been in September. The

Present Situation Index dropped to 120.6 from a downwardly

revised 127.9. The Expectations Index fell to 83.9 from a downwardly

revised 87.2. The Conference Board said that consumers’

assessment of both current conditions and the short-term

outlook softened, but expectations regarding income prospects

in the coming months were relatively unchanged. Overall, the

sentiment is that the economy will continue to expand in the

near-term, but at a moderate pace. Economists say a level of 90

indicates that the economy is on solid footing and a level of 100

or more indicates growth. Analysts caution that the real driver

behind consumer spending is income growth and that labor

market trends are a more accurate predictor of consumer behavior.

Consumer Spending Rises 0.5%

Consumer spending rose a solid 0.5% in September after

falling 0.1% in August, beating economists’ expectations.

Core consumer spending, which is adjusted for inflation, rose

0.3% after falling 0.2% in August. Consumer spending was

lifted by a 1.3% surge in purchases of long-lasting manufactured

goods such as automobiles. Spending on services rose

0.3%. Personal income rose 0.3% in September after rising

0.2% in August. Wages and salaries advanced 0.3% after edging

up 0.1% in August. Savings fell to $797.8 billion from

$820.5 billion in August. The personal consumption expenditures

price index (PCE), the inflation measure preferred by the

Federal Reserve, rose 0.1% after rising 0.2% in August. The

PCE index has risen 1.2% over the past year, the biggest gain

since November 2014, but remains well below the Fed's 2%

target. Consumer spending is closely watched by economists

because it accounts for 70% of U.S. economic activity.

Consumer Prices Rise 0.3%

The Consumer Price Index (CPI) rose 0.3% in September

after rising 0.2% in August and was up 1.5% from September

2015. Core prices, which strip out volatile food and energy

costs, rose 0.1% in September after rising 0.3% in August and

were up 2.2% from September 2015. Core inflation has been in

a range between 2.1% and 2.3% since December of last year.

This stabilization in core inflation supports the Fed’s cautious

approach to raising interest rates. Since 2014 inflation has been

held down by cheap oil and gasoline and a strong dollar; this

year oil prices have been creeping higher and the dollar has

weakened. Much of the increase in prices came from a 5.8%

rise in gasoline prices and a 0.4% increase in airline fares and

car insurance.

Unemployment Falls to 4.9%

The unemployment rate fell to 4.9% in October after rising to

5.0% in September and the economy added 161,000 new

jobs, below economists’ expectations. However, job gains for

September and August were revised up by a total of 44,000.

The average hourly earnings rate rose 0.4% for the month, and

was up 2.8% over the past 12 months, the fastest growth since

2009. Construction added 11,000 jobs in October, and retail

shed 1,100 jobs. Economists and policy makers generally agree

that the economy is near to full employment. Higher wages are

starting to encourage more Americans to quit their jobs with the

confidence they’ll find other work that pays more. The number

of people who quit as a share of the unemployed rose to 12.1%

in October, the highest since February 2007. The job report

contained nothing that would cause the Fed to delay a muchanticipated

increase in interest rates in December.

Durable Goods Orders Drop 0.1%

New orders for durable goods dropped 0.1% in September to

$227.3 billion after rising an upwardly revised 0.3% in

SIMPSON STRONG-TIE COMPANY INC. 5956 W. Las Positas Boulevard Pleasanton, CA 94588 U.S.A. 800-999-5099 www.strongtie.com


CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 4

August and were down 0.4% from September 2015. Analysts

had expected durable goods orders to increase 0.1%.

Orders for non-defense capital goods excluding aircraft, a

category that serves as a proxy for business investment

spending, rose 1.5% in September after rising 0.6% in August.

Core orders ex transportation were up 0.2% after falling

0.4% in August. Shipments of core capital goods, which factor

into GDP calculations for business spending, rose 2.2%

in September after three consecutive months of declines. The

durable goods report is often both volatile and subject to

sharp revisions.

Chicago PMI Falls to 50.6

The Chicago PMI fell to 50.6 in October after rising to 54.2

in September. It was the lowest level for the index since

May. The decline was led by a slowdown in production,

which fell 5.4 points to 54.4. New Orders fell to the lowest

level since May. Order Backlogs increased slightly but remained

below 50, the level that indicates growth. Supplier

Deliveries fell to the lowest level since June. Inventories were

relatively stable, with the indicator rising just above 50. Prices

Paid rose to the highest level since November 2014, following

a recovery in oil prices, and panelists also reported higher

prices for steel and plastic products.

Wholesale Prices Rise 0.3%

The Producer Price Index (PPI) rose 0.3% in September

after being essentially flat in August and was up 0.7% from

September 2015. The core PPI, which excludes food, energy

and trade services, rose 0.3% in September after rising 0.1%

in August and was up 1.5% in the 12 months through September.

Rising food and energy prices contributed to the

increase. The PPI for inputs to construction was up 1.6%

year-over-year for single-family and 1.4% for multifamily.

Q3 GDP Grows 2.9%

GDP grew 2.9% in the third quarter, after rising 1.4% in

the second quarter. It was the fastest pace since 2014. The

economy grew 0.8% in the first quarter. The growth largely

reflected a buildup of business inventories and what could be

a one-time jump in net exports due to better soybean shipments,

according to the Wall Street Journal. Morgan Stanley

reported that the reality is not as encouraging as it appears,

because there were slower gains in consumer spending,

sluggish business investments and lackluster housing market

growth. Consumer spending increased 2.1%, down from

4.3% in the second quarter, but still a driver of growth. Consumer

spending accounts for 70% of economic activity. Q3

consumer prices remained subdued, with overall prices rising

1.4% and core PCE prices up 1.7%, still below the Fed’s target

of a 2% increase. The personal savings rate remained at

5.7%. Analysts say the data suggests the economy is unlikely

to beat 2015’s growth of 2.6%, which was the best annual

growth since the expansion began. The economy has not

grown more than 3% since 2005. The nonpartisan Congressional

Budget Office projects GDP will grow about 2% annually

through 2026.

Job Openings Fall

Job openings fell 6.9% in August, or by about

388,000 jobs, to 5.4 million from more than 5.8 million in

July, according to the Labor Department’s monthly Job

Openings and Labor Turnover Survey, or JOLTS. It was the

fewest number of jobs available in eight months, but still

more than in August 2016. Job growth picked up over the

summer but has moderated this fall as the labor market has

tightened. Economists say that eventually that will lead to a

shortage of workers. Professional and business services

posted the largest drop, shedding 223,000 openings and

falling to 989,000, which is still well above jobs available before

the recession. Hires reached 5.2 million and a 3.6% rate

in August, little changed from July. There were 5 million separations

and quits remained mostly unchanged at nearly 3

million, a rate of 2.1%. Nearly two-thirds of job separations

are people voluntarily quitting rather than getting laid off or

fired. There were 1.6 million layoffs and discharges in August,

little changed from July, and still near pre-recession lows.

The layoffs and discharges rate was 1.1%. The number of job

openings has consistently exceeded the number of hires.

Quits are typically voluntary separations, and an increase in

quits indicates that people are more confident about their

ability to find another job. The JOLTS report is one of Fed

Chair Janet Yellen’s preferred economic indicators.

SIMPSON STRONG-TIE COMPANY INC. 5956 W. Las Positas Boulevard Pleasanton, CA 94588 U.S.A. 800-999-5099 www.strongtie.com


CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 5

Support for Rate Increase Growing

At the September policy meeting the majority of voting

members voted for the sixth consecutive meeting to leave

interest rates at near zero. Members felt that keeping rates

where they are was in the best interests of the domestic economy.

The decision was based on several factors, including subpar

inflation and a worse-than-expected August jobs report

from the U.S. Department of Labor. Members cautioned that an

increase may well come before the end of the year. A vast majority

of policy watchers expect that increase to come after the

November elections, most likely during the Fed's mid-December

meeting. Minutes showed that the committee saw positive indicators

as well, including improved labor market conditions and

faster GDP growth in the third quarter than in the entire first half

of 2016. Some analysts think that the Fed has already waited

too long to raise rates. Unexpected events, including the United

Kingdom's surprise departure from the European Union, derailed

the original plan to raise rates earlier this year. Three of

the FOMC's ten voting members voted for an increase at the last

meeting; previously there has been only one consistent dissenter,

Kansas City Federal Reserve President Esther George.

IMF Cuts U.S. Growth Forecast

The International Monetary Fund cut its forecast for U.S. economic

growth this year from 2.2% to 1.6%. Federal Reserve

policymakers last month forecast the U.S. economy would grow

1.8% this year and 2% in 2017. The IMF says that stagnation

threatens the global economy. Growth could decline further if

an economic downturn triggers opposition to trade and immigration,

the IMF says. The U.S. economy expanded at just a

1.1% annual rate from January through June. Economists expect

growth to rebound in the second half of the year. The IMF

predicted that global economic output would pick up slightly

next year, expanding at a 3.4% pace, boosted by recoveries in

Russia and Brazil. China’s economy, the world’s second-largest

after the U.S, is expected to continue to slow following 6.9%

growth last year. The IMF forecast a 6.6% expansion this year

and 6.2% next year for China.

NONRESIDENTIAL CONSTRUCTION

Architecture Billings Index Slips Again

The American Institute of Architects' Architecture Billings

Index (ABI) fell to 48.4 in September after falling to 49.7 in

August. It was the first time since the summer of 2012 that the

ABI has fallen for two consecutive months. The score was also

the lowest in since April 2015. The new projects inquiry index

fell to 59.4 after rising to 61.8 in August. The design construction

component fell to 51.4 after two consecutive monthly increases.

Three of the four sector indexes fell below 50, the level

that indicates an increase in billings, with mixed practice falling

to 49.8, multifamily residential dropping to 48.8, and institutional

dropping to 49.0. Commercial/industrial remained just above

50. Regional averages were mixed, with the South and Midwest

remaining in positive territory and the West and Northeast remaining

below. AIA Chief Economist Kermit Baker said that the

drop in demand could indicate continued hesitancy to move

forward on projects until the presidential election is decided,

and pointed out that the fact that new work coming into architecture

continues to slowly increase suggests that billings will

resume their growth in the coming months. The ABI is widely

considered a leading economic indicator of construction activity,

and is tracked by economists because it reflects the 9-to-12-

month lag time between architecture billings and construction

spending. The national index, design contracts and inquiries are

calculated each month, but the regional and sector categories

are calculated as a three-month moving average. Scores above

50 indicate growth; scores below 50 indicate contraction.

The Dodge Momentum Index Falls 4.3%

The Dodge Momentum Index fell 4.3% in September to 129.0

from its revised August reading of 134.8, the first drop for the

index in five months. The September decline was the result of a

5.3% drop in institutional planning and a 3.6% decrease in

commercial planning from strong readings in August when

several large projects entered planning. Nevertheless, the Momentum

Index is 5.1% higher than one year ago. The institutional

component is 5.4% above September 2015 and the commercial

component is up 4.9%. In September, five projects

entered planning each with a value that exceeded $100 million.

SIMPSON STRONG-TIE COMPANY INC. 5956 W. Las Positas Boulevard Pleasanton, CA 94588 U.S.A. 800-999-5099 www.strongtie.com


CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 6

For the commercial building sector, the leading projects were a

$200 million office tower in Chicago and a $150 million JW

Marriott Hotel in Irvine, California. The leading institutional projects

were a $150 million hospital in Evanston, Wyoming and a

$105 million hospital in Salt Lake City, Utah. The Momentum

Index is a monthly measure of the first (or initial) report for

nonresidential building projects in planning, which have been

shown to lead construction spending for nonresidential buildings

by a full year.

Post-Hurricane Labor Shortages

Hurricane Mathew caused a reported $10 billion in damages,

according to a recent estimate by Goldman Sachs, which is

about equal to the decade-average for spending on home renovations

in response to natural disasters. Associated General

Contractors reports that the reconstruction that will be needed

in the wake of Hurricane Mathew is creating demand at a time

when a contractor shortage has already made for long waits for

homeowners looking to remodel or update. There will also be

the need for large-scale reconstruction. Experts say increased

demand will lead to rising labor costs and even longer waits.

Stadium in San Diego on the Ballot

Voters in San Diego will decide whether to help fund construction

of a new stadium for the NFL's San Diego Chargers

as well as a convention center. A new study predicts the $1.8

billion project would create $2.1 billion in economic benefits

and create as many as 15,000 jobs, primarily in construction.

on 12 acres near the Wiehle-Reston East Metro in Virginia. The

1.5 million-square-foot project would feature a hotel plus residential,

office and retail space. The project will be developed in

four phases, with the 200-unit brick residential building going

up first. An off-road, two-way cycle track on Sunrise Valley,

pocket parks, a central plaza and a pedestrian connection to the

Metro station are also planned.

Tampa Convention Project

Infrastructure work is underway at a $2 billion, 9 millionsquare-foot

mixed-use development in Tampa, Florida. Actual

construction could start next year. The project's first phase

involves residential buildings, office space and a 500-room convention

hotel. At full buildout, the entire district will include 9

million square feet, with up to 5,000 residential units, 2.6 million

square feet of office space, approximately 500,000 square feet

of retail and up to 650 new hotel rooms with plenty of meeting

space.

Florida Agrihood

A $1 billion sustainable community development in Florida’s

Orange County called The Grow was approved. It’s being

called an "agrihood," and will include 2,078 homes, a community

garden, a 20-acre community park, 12 miles of biking trails,

an elementary school and 172,000 square feet of commercial

development, including retail and a restaurant that will use ingredients

from the community garden. Construction of The

Grow's first phase may begin next summer.

L.A. Arts District Project

Developer SunCal wants to build a mixed-use project on 14.5

acres of land on the edge of Los Angeles' trendy Arts District.

The project includes more than 1,700 residences, two hotels, a

school and retail and office space, as well as two towers more

than 700 feet tall in what has been an area of low-profile buildings.

Companies selected to submit proposals should be announced

soon.

Mixed-Use Project in Virginia

New York Bus Terminal Proposals

Five firms have submitted proposals to the Port Authority of

New York and New Jersey to redesign a bus terminal in New

York City. Proposals ranged from a less-than-expected $3.7

billion to a more-than-expected $15.3 billion. However, it’s unlikely

any of the designs submitted will be chosen, because the

West Side elected officials and the Port Authority recently

reached an agreement to an expanded planning process for the

terminal project that would better include the public and other

stakeholders in the process.

Vornado Realty Trust wants to construct a mixed-use project

that would include 22- and 24-story towers and other buildings

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CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 7

Development Plans for Portland, Oregon

CPB2, the company that's developing the former Portland

Company site in Portland, Oregon, unveiled its plan for the

$250 million mixed-use site. The plan includes housing, stores,

offices, restaurants, hotel rooms and a marina. CPB2 says it

hopes to begin construction next year.

Tremont Crossing Boston Project

The developers of Tremont Crossing want to build a 1.2 million-square-foot

mixed-use project in Boston's Roxbury

neighborhood. P-3 Partners includes Elma Lewis Partners and

Feldco Development Corp. The project, which needs Boston

Redevelopment Authority’s approval, includes 398,700 square

feet of retail space, 105,000 square feet of office space, 694

apartments and a new 31,000-square-foot location for Roxbury’s

Museum of the National Center of Afro-American Artists.

Tremont Crossing would occupy four city blocks on the vacant,

8-acre, BRA-owned Parcel 3 site.

University of Massachusetts Capital Plan

The University of Massachusetts board of trustees has OK'd

$212 million in capital improvements, part of a plan to spend

$2.5 billion over the next five years. Projects include a $71 million

parking garage, an $18 million dining hall and renovations

to several existing buildings.

National WWII Museum Expansion

The National WWII Museum is undertaking a $370 million

expansion across 3.5 blocks in New Orleans. Two new structures

are being added to the museum campus to provide additional

exhibition space, classrooms, a library, offices and retail.

The museum has started building the Hall of Democracy, a $33

million three-story pavilion for academic and outreach programs

and additional exhibit space. Work is also underway on

the nearly $12 million Bollinger Canopy of Peace. The Canopy

will symbolize the hope and promise unleashed by the end of

WWII hostilities. The second phase of the Hall of Democracy

project will be let for bids early next year and construction will

take about 17 months to complete.

Senior Living Communities in Michigan

Developer Moceri Cos. plans to build eight luxury senior living

communities over the next 10 years across Michigan. The

projects are expected to include amenities like clubhouses with

casual and fine dining; indoor and outdoor pools and spas; retail

space; exercise rooms and other features designed to appeal to

an aging population. They’ll also include independent and assisted

living, memory care and other services. Construction is

expected to start on the $1.2 billion worth of projects next year,

with the first phase finished as early as 2018.

Project Near Boys Town, Nebraska

A 500-acre mixed-use development worth $1.2 billion is being

planned near the village of Boys Town in West Omaha,

Nebraska. Within the 2.3 million square feet of planned commercial

space is an office campus anchored by Berkshire Hathaway’s

Applied Underwriters Inc. The project includes houses,

apartments, retail space and a hotel. The development will also

feature a lake, a pedestrian bridge over Pacific Street and 10

miles of walking and bike trails.

Nuclear Storage Facility in Idaho

The federal government wants to construct a $1.6 billion nuclear

fuel storage facility near the Idaho National Laboratory.

Initial site work could start in 2017, with fuel deposits beginning

in the early 2020s.

Commercial Construction Projects

Construction could start next year on a 66-story luxury residential

tower in Chicago. The $360 million building, which

will have 707 units and retail shops at street level, is part of the

three-tower, $1 billion Wolf Point development near Chicago’s

Merchandise Mart.

Developer Craig Hall broke ground on what will be Frisco,

Texas’ tallest office tower, and also the developer’s 17th

building in the Hall Park on the Dallas North Tollway. The 12-

story office high-rise will open in 2018 and will contain 300,000

square feet. It’s being built just south of the Dallas Cowboys'

new Star development.

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CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 8

A team that includes Related Cos., Skanska AB and Vornado

Realty was chosen for the $1.6 billion transformation of The

James A. Farley Post Office Building in New York City. The

building will be turned into a rail station and retail center. Construction

will begin this fall and should be completed in 2020.

Developer SL Green Realty Corp. has secured $1.5 billion in

financing for the 1,401-foot, $3.1 billion One Vanderbilt tower

in New York City, clearing a major hurdle in the way of

actually starting the project. One of the lenders, TD Bank, also

happens to be the building’s anchor tenant with a lease for

200,000 square feet.

Bond Companies has broken ground on a two-tower, mixeduse

project in Chicago’s evolving River West district. The

project could create 800 construction jobs. The towers, which

include residential and retail space, an outdoor pool, fitness area

and other amenities, will be connected by a fourth-floor bridge.

Howard S. Wright, a subsidiary of Balfour Beatty, has started

construction on a 19-story tower in Portland, Oregon. The

tower for BPM Real Estate will be home to a 180-room Radisson

Red hotel and will also have 175,000 square feet of office

space and more than 2,000 square feet of ground-floor retail

space. The project should be completed in late 2018.

Expansion of the Clearwater Marine Aquarium in Florida is

underway. The $50 million project includes construction of a

1.5 million-gallon, five-pool dolphin habitat. The project also

includes building an additional 103,000 square feet of guest

space, a 400-space parking garage and a natural habitat.

The $150 million Village at Northville, a mixed-use development

in Northville Township, Michigan, near Detroit, has

received approval and could start construction next year. The

53-acre village would include townhouses, along with a grocery

store, theater, gas station and more.

One Theater Square in Newark, New Jersey is set to break

ground soon. The 22-story residential tower with retail and

restaurant space and a budget of $116 million will be the first

residential high-rise built in Newark in half a century. The building

is set to open in spring 2018.

Michelin North America is building a $270 million tire distribution

center near Spartanburg, South Carolina that will include

five buildings with a total of 3.3 million square feet of

space. Construction should begin later this year.

San Antonio-based developer Embrey Partners will build a

350-unit apartment community in the mixed-use project on

the Dallas North Tollway. Called the Domain, the rental project

will include a clubhouse, two-story fitness center, dog park

and special bicycle garage. The complex is part of a $700 million

mixed-use development called The Gate.

Institutional Construction Projects

Balfour Beatty will build four new schools and renovate one in

Texas' Highland Park Independent School District under a

$110 million contract. The first projects in the five-year plan

include the construction of a new 100,000-square-foot campus,

the district’s first new elementary school since 1948.

HEAVY CONSTRUCTION

New York Will Raise Sunken Highway

A sunken highway in Rochester, New York is being raised to

form a new boulevard and construction-ready sites for mixeduse

projects. The city has received proposals for a variety of

projects, including retail, residential, lodging and recreation. The

mayor has forwarded three of four proposals from developers

to the City Council for review.

Illinois Considers RFIs for the Stevenson

Expressway

The Illinois Department of Transportation wants to add managed

toll lanes to Interstate 55, also known as the Stevenson

Expressway, and 18 companies responded to the request for

information and have expressed interest in the $425 million

project. The selected company will build and operate the lanes.

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CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 9

Nebraska Funds Highway Projects

Nebraska passed a six cent increase in the gas tax last year,

and is embarking on an estimated $300 million in highway

projects. They include extensive work on U.S. 275 using the

state’s first design-build contract. In addition, funds will be used

to construct a beltway connecting U.S. 77 and U.S. 275 southeast

of Fremont, widen 18 miles of U.S. 26 to four lanes west of

Scottsbluff, add passing lanes to U.S. 83 from McCook to North

Platte as well as several other projects.

25-Year Plan for Nashville

The boards of the Nashville Metropolitan Transit Authority

and Regional Transportation Authority have adopted a 25-

year plan worth almost $6 billion to build a public transit system

in the Nashville area. It will reduce traffic congestion and

connect the city to outlying areas. The plan has to go through

several reviews and an extensive approval process.

South Carolina’s Malfunction Junction

South Carolina is considering an $800 million project to mitigate

congestion at the intersection of interstates 20, 26 and

126, known as the "Malfunction Junction." Construction could

start in 2019 and take a decade to complete.

Oklahoma Approves 8-Year Plan

The Oklahoma Department of Transportation's (ODOT) $6.4

billion construction plan was approved. The eight-year plan

covers work between 2017 and 2024 and provides about $6.4

billion in funding for more than 1,600 bridge and highway projects.

The plan includes 824 highway bridge replacements or

major rehabilitations,751 miles of added shoulders or other

improvements to two-lane highways,152 miles of interstate

pavement improvements and $370 million in projects to address

urban highway congestion.

Heavy Construction Projects

The privately owned Addison Airport in Dallas is about to start

a $250 million project to upgrade the facility that is heavily

used by private planes. The 20-year plan calls for new hangars,

improved runways and taxiways, the renovation of old buildings

and other improvements.

Amazon plans to build a mammoth wind farm in west Texas

that will generate 1 million megawatt hours of electricity annually.

The wind farm is one of several clean-energy initiatives Amazon

has undertaken in recent years to support Amazon Web

Services (AWS) Cloud data centers. Amazon wants to have their

global AWS infrastructure powered by 100% renewable energy.

A joint venture of Shimmick Construction, Granite Construction

and Traylor Brothers won an $875 million design-build

contract from the Honolulu Authority for Rapid Transportation.

The team will build about 5 miles of an elevated guideway

that will be part of a 20-mile light rail system and new

transit stations.

McCarthy Building Cos. will be the contractor for a new $109

million toll road in Texas to connect Texas State Highway

Loop 1, also known as MoPac, to Farm-to-Market Road 1626.

Construction could begin this year and finish in 2019.

Tutor Perini won a $107.4 million contract from Virginia's

Commonwealth Transportation Board. The work involves

widening the ramp, adding a second exit lane from I-64 West,

adding a new two-lane collector-distributor road from I-64 to

serve the Newtown Road interchange and constructing a new

two-lane flyover ramp to provide direct access to I-264 East

from I-64 West. Construction will start this fall and take about

three years.

RESIDENTIAL CONSTRUCTION

Housing Starts Fall 9.0%

Housing starts fell 9.0% in September to a seasonally adjusted

annual rate of 1.047 million units after falling to 1.14 million

units in August. It was the lowest level for starts since early

2015. Single-family starts rose 8.1% to a seasonally adjusted

annual rate of 783,000 units in September after rising to

722,000 units in August. Multifamily housing starts fell 38.0%

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CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 10

to 264,000 units after falling to 420,000 units in August. Regional

starts were mixed. Starts fell 36.0% in the Northeast,

14.1% in the Midwest and 5.3% in the South. Starts remained

unchanged in the West. Economists expect demand for singlefamily

housing to keep growing. While this year is expected to

be a good year for multifamily, analysts believe that last year

was most likely the peak for the multifamily sector.

Building Permits Rise 6.3%

Building permits rose 6.3% in September to a seasonally

adjusted annual rate of 1.23 million after falling to 1.1 million

in August. Single-family permits rose 0.4% to a rate of

739,000 and multifamily permits rose 16.8% to 486,000. Regional

permit issuance was mixed. Permits increased 23.6%

in the Northeast, 15.8% in the West and 2.6% in the South.

Permits fell 5.2% in the Midwest. Permits have been above the

one million level for fifteen consecutive months, the longest

stretch in seven years.

New-Home Sales Rise 3.1%

Sales of new single-family homes rose 3.1% in September to

a seasonally adjusted annual rate of 593,000 units after falling

to a downwardly revised number in August. The inventory of

new homes for sale remained at 235,000 in September, a 4.8-

month supply at the current sales pace, up from a 4.6-month

supply in August. Regional sales were mixed. Sales rose 33.3%

in the Northeast, 8.6% in the Midwest and 3.4% in the South.

Sales fell 4.5% in the West. The new home market is being

hamstrung by low levels of inventory; furthermore, much of the

inventory in the pipeline is either under construction or not yet

started. According to an analysis by Wells Fargo, the actual

number of new homes available for sale across the country

inched up by 1,000 to 57,000 in September, while 141,000

homes were under construction. Sales of new homes are tabulated

when contracts are signed and are considered a more

timely barometer of the housing market than purchases of previously-owned

homes, which are calculated when a contract

closes.

Existing Home Sales Rise 3.2%

Existing home sales rose 3.2% in September to a seasonally

adjusted annual rate of 5.47 million after falling to a downwardly

revised 5.30 million in August. Sales were up 0.6% from September

2015. The big jump was driven by first-time buyers,

who accounted for 34% of existing home sales, the highest

percentage in more than four years. Total housing inventory at

the end of September rose 1.5% to 2.04 million existing homes

available for sale, 6.8% below a year ago. Inventory has now

fallen year-over-year for 16 consecutive months. Unsold inventory

is at a 4.5-month supply at the current sales pace, down

from a 4.6-month supply in August. Sales rose in all regions.

Sales were up 5.7% in the Northeast, 3.9% in the Midwest,

0.9% in the South and 5.0% in the West. Low levels of inventory

remain very challenging and are helping to keep prices up,

reducing affordability. The inventory problem is considered one

of the biggest obstacles to a robust housing recovery.

Builder Confidence Falls to 63

Builder confidence fell two points to 63 in October after rising

to 65 in September. Despite the fall, confidence was at the

second-highest level of 2016. Two of the three HMI (National

Association of Home Builders/Wells Fargo Housing Market Index)

components fell in October. The component gauging current

sales conditions dropped two points to 69 and the index

charting buyer traffic fell one point to 46. The index measuring

sales expectations over the next six months rose one point to

72. The three-month moving averages for HMI scores rose in all

four regions. The Northeast, Midwest and South each increased

one point to 43, 56 and 65, respectively. The West rose two

points to 75. It was the nineteenth consecutive month the HMI

remained above 50. NAHB says builders continue to express

concerns about shortages of lots and labor.

Mortgage Rates Virtually Flat

The 30-year mortgage rate was 3.47% at the end of October,

statistically unchanged from 3.42% at the end of September.

In October of last year 30-year rates averaged 3.76%. Rates

ticked up slightly mid-month but fell back during the last week.

For the first time since 2012 mortgage originations are expected

to top $2 trillion in 2016. Near-historic low mortgage interest

rates are spurring a burst of refinance activity. Low rates are

also supporting strong home sales, which are expected to reach

their highest level since 2006. House price growth also remains

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CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 11

strong, and low levels of inventory across many markets will

continue to put upward pressure on house prices for the foreseeable

future, according to Freddie Mac. Their forecast calls for

a $60 billion, or 11%, increase in third quarter mortgage originations

relative to the second quarter, and for total originations

to reach $2 trillion in 2016.

Remodeling Index Rises

The NAHB’s Remodeling Market Index (RMI) rose four points

to 57 in the third quarter. An RMI above 50 indicates that

more remodelers report market activity has increased from the

previous quarter than report it has fallen. The RMI’s current

market conditions rose two points to 56, with all three components

rising. Demand for major additions rose two points to 54,

demand for smaller remodeling projects rose three points to 56

and demand for repairs rose three points to 59. The future market

indicators component rose by five points to 58, indicating

optimism in future conditions. Calls for bids and appointments

rose six points to 58 and 59, respectively, the backlog of remodeling

jobs increased five points to 58 and the amount of

work committed rose two points to 55. NAHB says the RMI is

consistent with their forecast of gradual and steady improvement

in residential remodeling.

COMMODITIES

Cement

The PPI for cement was flat in September after rising 0.1% in

August. The PPI for cement was up 5.4% year-over-year.

Lumber

The PPI for lumber and plywood fell 0.6% in September after

rising 1.6% in August. The PPI for lumber and plywood was up

5.7% year-over-year.

Random Lengths reported that framing lumber composite

finished out the month of October at $350 per thousand board

feet, down slightly from $356 in September but up from $325

a year ago. Structural panel ended the month of October at

$372 per thousand square feet (3/8"), down from $373 in September

but up from $365 a year ago.

North American structural panel production fell 0.3% in the

third quarter from the second quarter of this year, while apparent

consumption increased 0.2%, according to The Engineered

Wood Association. Compared to the third quarter of 2015,

North American structural panel production and consumption

were up 3.6% and 5.3%, respectively. North American glulam

production rose 1.9% in the third quarter compared to the second

quarter, and I-joist production increased 5.1% while LVL

output fell 4.3%. On a year-ago quarter basis, glulam production

was down 1.7%, while I-joist and LVL production increased

2.5% and 2.3%, respectively.

Steel

The Producer Price Index (PPI) for steel mill products fell

0.5% in September after rising 0.5% in August. The PPI for

steel mill products was up 1.1% year-over-year.

ENR’s 20-city average price for three types of structural

shapes rose 0.2% in September, which pushed prices 0.5%

above 2015’s level. Reinforcing-bar prices increased 0.6% in

August, after climbing 1.7% in July. This hike left rebar prices

3.0% below a year ago, according to ENR. Prices for hot-rolled

carbon-steel plate fell 0.4% in September.

Negotiations toward a new softwood lumber deal between the

U.S. and Canada are continuing despite the fact that the oneyear

standstill period expired October 12, according to both

Canadian Trade Minister Chrystia Freeland and U.S. Trade Representative

Michael Froman. Meanwhile, in a press release, the

U.S. Lumber Coalition said that it "has no choice but to move to

initiate trade cases against unfairly traded imports from Canada

at the most effective time." Canadian firms have expressed concern

at the prospect of a trade war resulting in duties on their

exports of softwood lumber to the U.S. In addition, Quebec and

British Columbia are separately seeking solutions to the impasse

that would avoid a trade war.

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CONSTRUCTION UPDATE November 2016 | News from the Month of October 2016 12

Oil

The PPI for #2 diesel fuel rose 9.8% in September after

falling 5.1% in August. The PPI for #2 diesel was down

3.2% year-over-year.

U.S. crude oil production averaged 9.4 million barrels per

day (b/d) in 2015, and is forecast to average 8.7 million

b/d in 2016 and 8.6 million b/d in 2017. Forecast production

in 2017 is almost 0.1 million b/d higher than in the previous

forecast.

Brent crude oil prices are forecast to average $43/barrel

(b) in 2016 and $51/b in 2017, $1/b higher and $1/b lower

than forecast in last month's STEO, respectively. West Texas

Intermediate (WTI) crude oil prices are forecast to average

about $1/b less than Brent in 2016 and in 2017.

aspect of Saudi Arabia's plan to open up its $650 billion

economy.

OPEC's oil production rose by 160K barrels per day (bpd)

to a record-high 33.6M bpd in late October, even while

OPEC is trying to find ways to curb output and prop up prices.

The EIA says that right now it's difficult to assess how

the OPEC supply cut, if actually enforced, will affect market

balances. West Texas Intermediate (WTI) pushed above

$51/bbl after Vladimir Putin said Russia was ready to join an

output freeze, but to date no oil producers have willingly

kept even one barrel of oil out of the pipeline.

Global oil inventory builds are forecast to average 0.7

million b/d in 2016 and 0.3 million b/d in 2017.

EIA expects gasoline prices to fall an average of $1.97/gal

in January with a return to normal refinery and pipeline

operations, the switch to less-expensive winter gasoline

blends, and the typical seasonal decline in gasoline consumption.

For the year, U.S. regular gasoline retail prices

are forecast to average $2.08/gal in 2016 and $2.26/gal in

2017.

Benchmark North Sea Brent crude oil spot prices averaged

$46/barrel (b) in August, a $1/b increase from July.

This was the fourth consecutive month in which Brent spot

crude oil prices averaged between $44/b and $49/b.

Brent crude oil prices are forecast to average $43/b in

2016 and $52/b in 2017. West Texas Intermediate (WTI)

crude oil prices are forecast to average $1/b less than Brent

in 2016 and 2017.

Saudi Arabia is trying to reduce its reliance on oil and

reduce the country’s $97 billion budget deficit. They've

raised $17.5 billion in the largest ever bond sale by an

emerging-market country; Bloomberg reported that they

received orders of $67 billion. The debt issue is only one

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