Growing economy and tax cuts promise sunny days for construction
The mood in construction these days is upbeat. A growing economy and President Donald Trump’s proposed $1.5 trillion dollar infrastructure plan has contractors confident about sales growth, profits and staffing levels in the near future.
Plus, some companies are planning major expansions in response to the recently enacted federal corporate tax cut — paving the way for new projects.
By all measures, a construction boom could be in the making. In December, Virginia had the fourth-lowest construction unemployment rate, 4 percent, in the country, proof of how busy the industry has become.
There are billions of dollars in new construction in the pipeline in the Old Dominion. Senior-living facilities, data centers, hotels, industrial warehouses and large mixed-use projects are going up. Mixed-use projects are particularly prominent in Northern Virginia where an extended Metro system has sparked new development.
Sometimes even a single major capital investment, like Facebook’s plans to build a $1 billion, 970,000-square-foot data center in Henrico County, can create thousands of construction jobs.
Virginia’s real estate industry, which is closely tied to construction, has come roaring back since the Great Recession. The industry generated $67 billion in economic activity in 2016, the second-largest generator of direct economic activity in the state, according to a report commissioned by Virginia Realtors, the state’s largest real estate trade group. The report looked not only at housing, but the broad sector including housing, offices, retail and other commercial buildings, and industrial projects.
Yet even with so much activity, “contractors are advised to remain wary,” ABC chief economist Anirban Basu said after the trade group released the industry’s low unemployment figures earlier this year.
“The combination of extraordinary confidence and capital can fuel excess financial leverage and spur asset-price bubbles,” he said. “The implication is that as contractors remain busy, there should be an ongoing stockpiling of defensive cash. That recommendation will be difficult for many contractors to implement, however, with labor shortages and materials costs rising more rapidly and slender profit margins in many construction segments.”
Construction & development charts
- General contractors
- Architectural and engineering firms
- A sampling of some of Virginia’s major road projects
- Commercial real estate firms