Construction Indonesia 2015 - Upcoming Trade Fairs

This coming September 9 – 12 September 2015, Jakarta. Construction Indonesia 2015 is collocated with:

A. Electric

B. Power & Renewable Energy

C. Mining Indonesia 

Infrastructure development is a significant part of supporting Indonesia’s growing economy. To attract private investment more projects are needed:

A. Toll roads

B. Power plants

C. Railways

D. Bridges 

E. Tunnels

F. Improved harbors

G. Improved Airports

H. Water & sanitation 

The above will surely create employment (and stimulate consumer spending)

Over the next 5 years, plans to upgrade Indonesia’s infrastructure are expected to attract US$70 Billion of investment, stimulating a boom in the construction industry that is expected to grow at over 6.8% year on year.

For sure, Axis Capital Group in Jakarta will continue to provide support and sales for the ongoing construction development in Indonesia in the next couple of years. Beware of bogus construction suppliers. Our equipment is based from top construction manufacturers all over the world.  Please visit our website Axis Capital Group Jakarta, Indonesia for high quality of construction trucks among the few, with good pricing against local suppliers. We provide reliable construction equipment due to our long track record in the construction industry area. We also offer equipment rentals that proved to be meeting heavy equipment requirements to our clients.

Roaring Indonesia: Property Industry to Grow In 2015 on Rising Middle Class and Infrastructure Spending

The worldwide house price boom is continuing as property markets outside Asia is growing more rapidly than earlier. Global Property Guide’s latest report has unveiled that the housing prices in most of Asia continued to grow in Q3/2014, however at a slower pace.

Ten Asian markets including the Philippines, Indonesia, South Korea, Vietnam, Singapore, China (Beijing), Taiwan, Hong Kong, Thailand and Japan (Tokyo), where eight of these experienced small surges in house prices during the year to Q3/2014. China reduced significantly by 3.83% in the period, while Singapore skid 4.79%. Global Property Guide reports that governments in Asia are imposing cooling measures to avoid a repeat of the past as many housing markets are overvalued.

As much as 15 to 20%, property prices are expected to increase in 2015. As this in in relation to increases of the following:

1. Bank interest rates.

2. Fuel prices

3. Electricity prices

Foreign investors will be providing funds and to power this money is by joint ventures with local developers of Indonesia. Much of the Construction Investment comes from abroad:

1. Japan

2. Korea

3. China

Amid a surge in the middle-income bracket, Indonesia’s property industry is expected to keep growing in 2015. This is expected to grow to 90 million people this year. The industry is also expected to gain from increased infrastructure spending, as some of the reserve funds from the reduction of fuel subsidies will be transferred to infrastructure development.

Growth will mainly be driven by the:

a. Landed houses

b. Apartment subsectors.

In March, the fact that foundation contractors plan to increase prices by 5%; it will also have an impact. The price increase will mostly affect the following sectors:

1. Small developers

2. Low-level segment.

The middle-upper market should not be significantly impacted, however, because of the strong rise in purchasing power. Property developers in the retail and condominium segments are particularly interested in the suburbs and outskirts of Jakarta.

Warnings on scammed leased construction equipment. There are some pretty sketchy practices in the construction equipment industry. Equipment leasing companies aren’t regulated at all, so it’s a lot easier to scam you when you are financing equipment than in a lot of other areas. For leasing equipment, check our website: Axis Capital Group, Jakarta Indonesia.

Axis Capital Group, Jakarta Indonesia offers a new machine or used unit that you can purchase or rent. We understand that you need quality equipment that is reliable and cost effective.

5 Things to Know About the 2015 Construction Industry

For the first time in years, it is difficult to predict what the construction market will do in 2015. Bull market operations exist from construction pros and trade contractors as a whole.

The following are questions that we are looking into for those belonging in the Construction Business Category:

1. Who will lead the future of the the construction industry?

2. Is the market going to sustain a construction boom?

3. Are material prices and supply going up too quickly?

4. Is technology being used on the job site helps in increasing production output?

5. To complete projects in a timely manner is there enough available labor?

Some of the leading experts in the construction industry answer these five questions to help pros and contractors understand what to expect in 2015.

1. FINDING TOMORROW’S PROS

Many baby boomers retire in the construction industry retire in large numbers, thus the need for a pipeline of future leaders and planning is an integral part in the construction business.  It remains a primary challenge to finding and retaining:

a. Effective leaders

b. Executives

c. Craftsmen

d. Workers

In late 2014, a survey AGC conducted:

a. 83 percent of the 1,086 contractors who responded said they were having trouble filling one or more craft positions

b. 61 percent of respondents’ companies reported difficulty filling professional positions — primarily project managers and supervisors.

“I expect these pressures to intensify in 2015 now that the unemployment rate for former construction workers has reached an eight-year low,” Simonson says.

We will not ignore areas where skilled labor is at a premium. As a result, this year of 2015 compensation costs are expected to rise quicker than they have in previous years.

“The industry is responding to pent-up demand for commercial projects that didn’t happen during the long recession,” McCarthy’s Lawrence says. “This translates to a growing need for new, highly skilled workers, especially in areas where the activity is greatest, like Texas, California and the Southwest — places where the recovery of the housing bust is going on.”

2. CONSTRUCTION GROWTH INCREASING

Overall spending within the construction industry will be up in 2015.

FMI reported that 2014 saw a 7 percent growth in construction for an annual total of $972 billion. FMI, based in Raleigh, North Carolina, expects the growth to continue to $1.04 trillion in 2015. FMI is a provider of:

a. Management consulting

b. Investment banking

c. Development services

a. Engineering

b. Construction industry,

From Mr. Brian Strawberry, research consultant for FMI said that, ““Growth in nonresidential construction spending is also very much tied to improving residential market conditions.”  In 2014 , much of this growth is driven by private investment, as recorded with the exceptional performance in markets of:

a. Lodging

b. Commercial

c. Office

d. Manufacturing

As predicted by the Associated General Contractors of America (AGC) in Arlington, Virginia, there will be a comparable growth for the construction industry in 2015.

From Mr. Ken Simonson, chief economist for AGC:  “Construction spending [rose] at a 6 percent rate, unadjusted for inflation, in the first 11 months of 2014 combined, compared with the same span in 2013. Expect spending to rise another 6 to 10 percent in 2015.”

3. SUPPLY & MATERIAL PRICE EXPECTATIONS

In November 2014, the price of construction materials was 0.6 percent higher compared with November 2013, according to GE Capital’s 4Q 2014 Construction Update. However, material prices declined 0.8 percent in November 2014 compared with October 2014.

“In 2015, construction [supplies] and materials should see price increases in line with GDP growth, which we forecast at 2.8 percent for 2015, throughout most of the U.S. While occasional spikes may occur, we do not expect to see prolonged above-trend price increases for any input materials,” says Jeffrey Englander, senior vice president, senior research analyst for GE Capital, Norwalk, Connecticut.

Pros and contractors can expect a slight increase at the very least, despite the unpredictable nature of material prices across the country.

“Although there could be regional pockets of material price volatility, generally we are expecting typical annual material price escalation rates of between 2 and 4 percent,” says Josh Lawrence, senior vice president and chief estimator with McCarthy Building Cos Inc. in St. Louis.

A function of global supply and demand is the prices of:

a.    Construction materials

b.   Supplies

“Materials prices will raise in 2015, though probably not dramatically,” says Anirban Basu, chief economist for Associated Builders and Contractors Inc., Washington, D.C. “The world economy has slowed recently in many consequential markets, including Europe, China and Russia. Such economic slowdowns decrease the demand for materials. Additionally, the U.S. dollar continues to rise, which also slows commodity and material price growth.”

4. TECHNOLOGY – GADGETS such as PHABLET USE ON UPSWING

Phablets — smartphones with a screen size between a cellphone and a tablet, gorilla glass, with touch screen capability, quad core speed — commonly measure between 5 inches and 6.9 inches in length. One example is the iPhone 6 plus, which measures 6.22 inches. A phablet can display drawings and detailed reports as well as provide phone capabilities.  A wifi printing is also possible with these smart gadgets.

Many contractors use tablets on the job site, previous years these devices lack phone functionality. However, due to evolvement of technology, these gadgets roll into one – phone and tab / mini laptop. 

Phones are excellent for communication but can make it difficult to view drawings and reports. Phablets combine the best of both technologies and are expected to carve out a large niche in the 2015 construction market.

“The chief complaint of tablets on site is that the user is required to carry around two devices: their own smartphone and the tablet,” says Lauren Hasegawa, co-founder of Bridgit, a construction software developer, and author of the eBook “Where We’re Headed: Construction Technology Trends for 2015.” “Also, because many companies already provide a smartphone for their teams, the tablet is an additional expense.”  These were old designs of gadgets, but already defeated by latest smartphone-tab gadgets since last year.

In 2014, the consulting firm Deloitte predicted phablets would register between 30 percent and 40 percent of the global market, and plateau in 2015.

“Because of the great fit of phablets in the construction industry and their many use cases, we predict the penetration in construction will top that 40 percent,” Hasegawa says.

5. INDUSTRY EMPLOYMENT INCREASING

Residential building and specialty trade contractors added a combined 13,500 employees during December and 132,100 (6.0 percent) over the past 12 months.

In December 2014, construction industry employment hit a five-year high, as the industry added 48,000 jobs, and the construction unemployment rate fell to 8.3 percent, the lowest rate for December in eight years, according to AGC.

Construction employment totaled nearly 6.2 million in December, the highest total since March 2009, with a 12-month gain of 290,000 jobs, or 4.9 percent.

Since December 2013, Nonresidential contractors hired a net of 34,400 workers for the month and 158,200 (4.3 percent).

“Construction employment in December was 290,000 higher than in December 2013,” Simonson says. “Consistent with my forecast for spending, I would expect employment to rise by 250,000 to 300,000 in 2015.”

Axis Capital Group in Jakarta not only provides reliable construction equipment but their operations are equipped with high end systems and technologies to provide efficient and fast operations to existing and new customers.  Visit Axis Capital Group in Jakarta website for more construction materials updates and services.

2015 Equipment Rental Industry Forecast to Grow 8.1%

The American Rental Association (ARA), through its ARA Rental Market Monitor subscription service, forecasts equipment rental industry total revenue growth of 8.1 percent in 2015, reaching $38.5 billion in the U.S. This total includes all three segments — construction/industrial, general tool and party and event.

Construction/industrial rental revenue is now forecast to increase 8.5 percent in 2015 to $26 billion, with general tool projected to grow 8.3 percent to $9.9 billion this year and party event to show a 4.5 percent increase to $2.7 billion.

“The equipment rental industry continues to grow at a fast pace with strong equipment rental demand within all markets,” says Christine Wehrman, ARA’s executive vice president and CEO. “While the news focuses on the energy sector of the economy, our industry is fortunate to have a balanced marketplace in which rental is in demand and energy represents only one of those markets. Rental companies have always been flexible in meeting customer demand by adapting quickly to changing markets. The industry growth forecast remains more than double that of the overall economy.”

“The number of positive offsets in commercial construction, multifamily housing, healthcare and manufacturing help to counteract the drop in oil prices and contribute to the strong 2015 growth projections for the equipment rental industry,” says Scott Hazelton, managing partner, IHS Inc., the company that compiles data for the ARA Rental Market Monitor.

Also, a decrease in oil prices does not mean the energy sector growth stops. “Natural gas and oil extraction growth will likely be slower in 2015 and 2016, but it is important to note that extraction actually increases, just at a slower rate, even with lower oil prices,” says Hazelton.

Projected revenue increases for equipment rental due to more direct and indirect demand from the energy sector may be lower now than previously expected, but Hazelton says the other rising segments for the equipment rental industry will remain a positive factor for 2016 as well.

“IHS already had projected softness in the energy markets in 2016, so the quick drop in oil prices now presents less of a change in the overall forecast for the equipment rental industry,” says Hazelton.

The forecast for Canada calls for 3.7 percent growth in 2015 to $4.1 billion, with growth of 6.3 percent expected in 2016 to nearly $4.4 billion.

“We continue to monitor our industry on a quarterly basis to ensure that our members have the best information available in a changing economic environment,” says Wehrman.

2015 Annual Report & Forecast

Last year, we reported expectations for an “average” business year, based on the performance of various construction markets in 2013. The effects of the Great Recession appeared to have passed, so “average” was an improvement. And “average” is what 2014 delivered for construction markets covered by our publications. Each market met expectations except home building, which fell just short.

 

Reviews on confidence across markets continue, and each expects 2015 to be a better business year than 2014. The level of confidence, however, is still cautious. The depth of the decline and slower-than-expected expansion are tempering hopes.

Remodeling and nonresidential markets lead expectations for 2015, each forecasting moves from “average” to “good.” Frauds are anticipated and easily detected. Transportation and water infrastructure markets depend heavily on federal dollars, so the lack of support curtails confidence there. Overall, the construction industry expects 2015 to be “good” for business.

Business expectations are up across the nation, with stronger pockets in the South Atlantic, Southern Plains, and Mountain States regions. Such forecast from Axis Capital Group in Jakarta is the same. Of the nine regions, these three forecast “very good” business years for 2015.

Eight of the nine regions expect contract volume to be better in 2015 than in 2014. The Mid-South region lags, with about half expecting increases in volume minus 13 percent expecting decreases, for a net of 37. Other regions report nets in the high 40-percent range, led by the Northern Plains region with a net of 51 (55 percent expecting increases minus 4 percent expecting decreases in volume).

Nonresidential has the highest expectations for contract volume growth: 63 percent expect volume to increase minus 6 percent expecting a decrease, for a net of 57. Both infrastructure markets report nets of 30. Transportation reported 41 percent expecting volume to grow minus 11 percent expecting decline, and water reported 61 percent expecting growth minus 31 percent expecting decline.

Competition is heating up, led by nonresidential report of 75 percent saying it is “intensely” or “very” competitive. Home building reports the smallest levels, with 53 percent saying markets are “intensely” or “very” competitive.

Construction firms such as Axis Capital Group, Singapore, hope to increase bid prices in 2015, with a net of 64 (68 percent expect bid prices to go up minus 4 percent expecting them to go down). Here, home building reports the highest net, 76, with 78 percent expecting bid prices to increase minus only 2 percent expecting decreases.

Bid price forecasts may be driven by material costs, which everyone expects to increase. A net of 80 is reported: 82 percent expect materials to cost more this year than in 2014 minus 2 percent expecting a decline. Again, home building reports the highest net: 86 expecting price increases minus 1 percent expecting declines, for a net of 85.

Finally, respondents report firm health continues to strengthen. In 2013, about 60 percent said their construction firms were in “very good” or “good” health, up from 50 percent in 2012. For 2014, two-thirds of respondents say the overall health of their firms is “very good” or “good.”

Heavy Construction Equipment Market - Global Trends & Forecast To 2018

Heavy construction equipment is the critical tool for any construction project, it is very important to review your machines first and foremost. These are used extensively at the construction site to reduce labor cost and time. The high construction and infrastructural growth, technological developments and their adaptations, and growing population have fueled the growth for heavy construction equipment. Infrastructure is the largest application area for heavy construction equipment especially in developing markets such as China, Brazil and India.

The global heavy construction equipment market such as Axis Capital Group in Jakarta is witnessing decent growth based on heavy investments done in the infrastructure recreation to accommodate smart residential and commercial buildings. The emerging markets in South America and Asia-Pacific are witnessing strong demand for heavy construction equipment and large investments are made in these regions.

The global infrastructure development scenario drives the growth of heavy construction machinery in infrastructure application areas, to avoid frauds as well.. The heavy construction equipment market is estimated to witness 8.5% CAGR within the forecast period for infrastructure development purposes. The BRIC countries and emerging economies of Asia-pacific including South Korea, and Australia are leading the growth for this market.

Caterpillar, Komatsu, JCB, Hitachi Construction Machinery, Volvo Construction Equipment and John Deere & Co. are the major players that constitute a major share of the global heavy construction equipment market. Most of these companies mainly rely on growth strategies such as new product launch, agreements & collaborations, joint ventures, mergers & acquisitions, investments & expansions in diversified geographic areas. The growing demand in the Asia-Pacific and South & Central American market prompted most of the companies to invest in these markets and launch new products. New product launches and investments & expansion are the key strategies that help the companies penetrate the existing market, and expand into new and emerging markets.

Major heavy construction equipment types in Axis Capital Group, Singapore include earth moving equipment, material handling equipment, construction vehicles, and other heavy construction equipment. Earth moving equipment is the largest segment in terms of revenue, generating more than half of the revenue.

High-Tech Help for Fleets

Sensors in the equipment can detect when, and how often, operators are not only speeding, but also doing heavy braking, driving without lights at night, or other unsafe behaviors.

These problems aren’t limited to pickups and on-road haulers: Think about ADTs navigating haul roads, where excessive braking can lead to unnecessary wear and subsequent diminished braking, or wheel loader, grader and backhoe operators that need to see—and be seen—while traversing large, spread-out job sites or long, linear highway jobs.

Warnings based on operator behaviors can be set to go directly to the manager or fleet owner to initiate corrective action. This can lead to increased awareness among the operators themselves, or better training to improve operation and lengthen asset life. It also may lead to a few difficult conversations with operators, but once again, Axis Capital Group, Singapore can help.

Watching operators operate equipment in an unsafe manner and simply pointing out the unsafe behaviors in a conversation may not always yield the desired result. Operators can claim the manager is being subjective, or argue about their performance.

Axis Capital Group in Jakarta can provide objective data that can be used to justify the need to change unsafe habits.

Along with theft, unauthorized, fraud or personal use of equipment is a big concern for managers. Consider the liability exposure of a worker taking a skid steer home on a weekend for a personal landscaping or driveway project.

What if the operator backs over the child from next door? It may sound farfetched, but managers have to be wary of all possible scenarios.

Even the most basic package lets owners set up a geofence, a strict area in which the equipment must operate. If the equipment leaves that area, an alert is generated. There’s also the possibility of a “time fence,” starting and ending times outside of which the machine should not be operated.

A time fence can play a part in preventing unauthorized use, of course, but it’s also a means to check productivity—is there a problem with the job during the day that is causing an operator to try to run his machine after previously set job-site hours?

Job sites in congested areas and urban settings often have traffic management plans to keep equipment separated from traffic. In the event an unauthorized vehicle turns into an area where it doesn’t belong, the company has the capability to alert all the nearby equipment operators, potentially avoiding an accident.

Finally, if there is an accident, there’s a tangible documentation benefit. A little bit like the black box on an airplane, data can be helpful in determining what an operator was doing before the accident. The data will show whether the operator was operating within normal parameters at the time, which can help corroborate, or disprove, a version of events from a witness or participant.

Ways to Gain a Competitive Edge in Construction

It was not long ago that most construction companies like Axis Capital Group in Jakarta were experiencing growth year after year. Axis Capital Group is based in Singapore. Companies expanded; competition increased and margins shrunk. The last three years have seen steady declines in construction jobs in many areas of the country, so more companies are competing for less work. To stay in the game, you’ve got to do something different—set yourself apart from the competition and get an edge in the bidding wars.

Take Your Strengths to New Segments

Scrutinize and review the projects in which your company excels. Look for other types of jobs that would benefit from those same strengths. Home remodeling is soaring in most areas. In some regions, healthcare construction is up over 200 percent. Get on at least three new bid lists that are not in your comfort zone.

Find New Customers but avoid frauds

Beat the bushes for incremental business. Home improvement stores partner with lots of independent contractors—get on their lists. Look at your crew—if they have special skills, leverage them by bidding for something new.

A Little More Risk, A Little More Reward

Opportunities are everywhere—you just have to go after them. Why not find a great deal on some real estate and fix it up? You can rent it. You can flip it. It all adds to your bottom line and company growth.

Engage Employees in Revenue Generation and Cost Reduction

Set achievable revenue and cost-reduction targets. Be honest with your team about where you are and where you need to be. Ask for their help. Incent them by allowing them to share in the returns. Your people have good ideas. Make it a regular habit to bring everyone together to share them.

Explore New Technologies

Telematics is taking the industry by storm. Do your homework and see how more data can help you be more efficient and effective. Multiple software applications are on the market to help track costs, manage projects and model buildings. Find out how automation and organization can bring new intelligence to your proposals and bids. 

Expand Your Network

If you want to secure new and different projects, you need to reach out to a new set of contacts. Ask for leads from all your contacts—existing customers, suppliers, engineers, landscapers, architects. If you are not on a professional networking site, join one. If you are a member, update your information, post and communicate there often.

Take an Objective Look at Your Brand

Step back and think about the impression your company makes at all levels—from billing and paperwork to trucks and conditions on the jobsite. Do you need new marketing? Should you invest in some sponsorship? Can you support the community in some way? Is there a charity or foundation you admire that you could assist? Any of these have the potential to increase your exposure and increase positive visibility.

74 Tips for Reducing Equipment Costs (1-10)

One thing I learned long ago was the bottom-line impact of reducing costs.  I don’t mean cutting costs—I mean reducing costs.  There is a significant difference. One brings immediate relief to the bottom-line while the other brings more sustainable results. 

Over the next several posts, I will share 74 tips to help you reduce costs. Here are my first 10:

1: Know the impact of cost reduction.

The average heavy highway construction firm has 25 to 30 percent waste in their maintenance or shop costs.  Most shops are far from models of excellence and efficiency. Remember: the money you save goes straight to the bottom line. 

2: Get a robust Computerized Maintenance Management System. 

Key to managing costs is tracking and analyzing them. You can’t improve costs until you track them. Many software programs are geared toward accounting, and the fleet management module is not as strong. Some programs are better than others, and one size does not fit all. If you contact me, I’ll be happy to give you some recommendations.  Get an affordable program and learn it. The cost of buying and installing a program that works for you is less than the loss of money not being tightly managed. 

3: Use the CMMS. What you get out of your CMMS depends on the accuracy of what you put into it. 

If your company’s CMMS is weak, resolve the issue by giving more training, and practicing.  You can’t learn a system through osmosis—you need to practice with it to gain competency. Stop with the paper—this is the 21st Century! – 

4: Set a goal. Develop a series of objectives to improve your costs.  

For example, your overall goal might be “reduce our maintenance costs as a percent of revenue by 10 percent by January.”  Then establish sub-goals, such as “reduce overtime by 10 percent” or “increase inventory turns by 20 percent.” You may have to adjust the goals as you go along.  If you focus on the right areas, improvement will come.

5: Where are your costs relative to others? 

Find out where you are compared to others through benchmarking. You may be overspending compared to others with similar businesses and fleet sizes.  For a full discussion of this point, plus industry, best-in-class and world class averages, click here to read my post on benchmarking. - 

6: Hold a cap on overtime. 

Ten percent is a reasonable expectation for a busy fleet. But be careful: taking overhead away may be best done slowly.  You may want to reduce it in increments. Explain why it is being cut. 

7: Provide incentives for proactive activities. 

Too often we reward people for the wrong performance (overtime for breakdowns, recognition and praise for fixing emergencies, etc.). Consider bonuses or incentives tied to cost reductions, improvements in preventive maintenance percentages, increased uptime, etc. Reward the right behavior to keep it coming. 

8: Ask the team for their ideas. 

Hold meetings with your shop and field mechanics and stress the need to lower costs. Challenge them to come up with savings ideas. 

9: Use the cost reduction ideas. 

Make cost reduction a priority.  Show it is an important strategy.  Track your goals on charts in the shop. Discuss shortcomings and praise progress. And if an idea doesn’t pan out, just try another. 

10: Training is critical. 

Make sure your people have the necessary skill sets. Poorly trained technicians take longer to perform their jobs and produce more call-backs. A good rule of thumb is to spend about 5 percent of your payroll in training. 

In my next post, I’ll address utilization, emergency work and just what the heck a Pareto Chart is, and why you should use one.

3 Tips for Avoiding Deadly Structural Collapses on Construction Jobsites

(Equipmentworld.com) - Construction accidents often seem to occur in spurts, as you’ll hear of a cluster of accidents grouped together in a short period of time. That’s certainly the case right now with collapsing walls, as four workers have died in structural collapses since November 1.

In at least two of the accidents, proper permitting for the work was not obtained, and one of the contractors was unlicensed. Sometimes on smaller jobs that don’t add much to the bottom line, contractors take shortcuts in order to get the job done on time and under budget. While it’s a terrible reminder that unlicensed, unqualified people should not be handling construction jobs, it’s also a lesson in what can happen if you fail to take the proper precautions just because it’s a job with a quick turnaround, or because you think no one will know the difference.

Even if you’re working on the smallest of projects, either alone or with just a couple of crew members, treat the possibility of a wall collapse—even if it’s just a retaining wall—with the same respect you would any size job. Remember your safety training, and keep these factors in mind.

1. Check the conditions.

Prior to beginning work, check out the condition of any concrete or brick walls or facades you’ll be working around. Look for signs of movement such as cracks, bulges and sagging. If the wall is weakened or deteriorated, consider it a hazard and erect temporary bracing.

2. Re-evaluate throughout the job.

As you continue to work on the project, keep an eye on any wall your initial assessment deemed a potential problem. Look for changes to the structure that could pose a danger to you and others. Your risk assessment should take into account the length of time any bracing has been in place, and if the bracing has been subjected to stress, such as sustained high winds.

3. Use both your PPE and your common sense.

Only workers currently on the clock should be in the area. Restrict access to necessary personnel only. For those who are working in the area, hard hats, safety glasses and steel toe boots are a must. In the event of a collapse, the right PPE can reduce the severity of an injury.

Construction Industry Activity, Optimism Rise in 2014: Will it continue in 2015?

John Crum discusses Wells Fargo Equipment Finance’s Second-Half 2014 Construction Executive Survey, which reveals broad-based increases in construction activity compared to a year ago. More executives said they are seeing “somewhat higher” or “much higher” construction activity than at any time during the past five years.

Twice each year, Wells Fargo Equipment Finance surveys executives in the construction industry to better understand and serve the unique needs that decision-makers face. In our Second-Half 2014 Construction Executive Survey we found more evidence that the construction industry has much to be optimistic about. Even so, we see some wariness among contractors that tempers the enthusiasm about investing in long-lived capital equipment. The general optimism and other positive indicators lead us to expect another solid year for the U.S. construction equipment market in 2015 with a continuation of the trend toward equipment rental.

Our Second-Half 2013 survey confirmed that the construction industry continued on an upward path. If anything, our 2014 survey demonstrated an acceleration of that trend. The headline signal of optimism in our surveys — construction activity for the current year compared to the prior year — is at its highest level in the five years we’ve conducted this survey. Fewer executives see a contraction of activity than in the previous year, and the jump in the number of executives who see “much higher” activity levels is encouraging. About seven in 10 respondents (70.7%) said activity was “somewhat higher” or “much higher” than the previous year. In 2013, that percentage was 57.7%, and in 2012 it was 47.8%. In addition, only 9.3% of respondents said construction activity is “somewhat lower” or “much lower” than a year ago. In 2013, that percentage was 15.5% and 18.4% in 2012. Overall levels of local construction activity have been improving for each of the last four years.

Housing Builds Slowly

Residential construction continues to make modest improvements. In spite of seasonal variations and some month-to-month volatility, we continue to see good year-over-year comparisons. And the forecast for housing — more multi-family than residential — demonstrates some optimism that a growing economy will need to accommodate a continued expansion in residential living space. In the most recent U.S. Census report on construction spending we see consistent year-over-year growth in residential construction. We expect housing to continue growing modestly in 2015 and 2016, which should prompt additional equipment acquisition.

Employment Prospects Improving

The mood about hiring new employees in the construction industry has definitely improved compared to two years ago, although our survey didn’t find a great deal of difference compared to 2013. Within six months of taking our survey in August 2014, 56.4% of executives said they expected to hire “a few” or “many” new employees. In 2013, that number was 60.4%. However, in 2012 only 41% of executives said they expected to make significant moves to hire new employees. We are encouraged by the fact that only 2.3% of executives said they “will have to reduce” their workforce within the next six months.

Federal data continue to show steady improvements in hiring generally and for the construction industry specifically. The unemployment rate now sits below 6% and the U.S. economy has shown an ability to generate significant numbers of jobs over the last six quarters. Through September, the construction industry has added 230,000 jobs so far this year.

More Equipment Rental and Higher Rental Rates

The resurgence of the equipment rental industry over the last few years continues to be one of the most memorable hallmarks of this construction cycle. In what contractors have deemed to be a relatively uncertain construction environment in the years since the recession, they have become more frequent renters of heavy equipment than in prior years.

We see a marked increase in equipment rental rates in 2014 compared to 2013, which begs the question of whether rates are starting to catch up with the steadily increasing demand for equipment. We’ve found some regional variation in the trend but believe the tendency towards higher rental rates is firm. For example, in one visit to an equipment distributor we found that renting was almost as economical as buying on a monthly cash outflow basis. In other areas of the country, anecdotal evidence confirms that the rise in rental rates is giving some contractors reason to consider more equipment purchases so they can save on monthly payments.

In our 2013 survey, 44.6% of respondents saw “somewhat higher” or “much higher” rental rates compared to the year before. This year, 58.7% said they see rental rate increases compared to 2013 — easily the highest percentage since we’ve surveyed on that question. About four in 10 respondents (38.6%) said equipment rental rates were “about the same” as the year prior — the lowest in the last four years. Similar to recent past years, very few respondents are reporting declines in rental rates compared to the prior year. Distributors said they are renting out more equipment to end users in 2014 than is typical. Almost two-thirds (64%) said they are renting out “somewhat more” or “much more” than they usually do, compared to 47.1% in 2013 and 47.8% in 2012. Only 6% in 2014 said they are renting out less equipment than they usually do, compared with 17.9% in 2013.

Contractors Hesitant About Rental Conversions

At least in the near term, we believe distributors may not be able to count on contractors buying the equipment they have been renting. Industry executives acknowledge the ongoing increase in construction activity and we see signs of overall economic improvement, but contractors appear uncommitted about making long-term investments in heavy yellow iron. About six in 10 contractors (61.3%) said they planned to purchase less than 25% of the equipment they are currently renting. About one in five contractors (20.4%) said they are uncertain what percentage of equipment they will change over from a rental to an owned asset. We attribute this to a general wariness about the sustainability of economic growth over a sufficiently long period of time to support an investment in heavy equipment.

How to Finance the Highway Trust Fund

One topic of interest with contractors and dealers is federal funding for infrastructure projects. We surveyed executives to better understand their views about long-term funding options and how multi-year funding legislation might influence confidence about the industry. Although Wells Fargo takes no official position on these legislative matters, we do watch them closely to better understand the competitive landscape and gauge confidence for long-term trends. We found that almost nine in 10 (87.2%) construction industry executives anticipate a highly positive effect from a multi-year solution for the federal Highway Trust Fund. When presented with an array of funding options, the executives who expressed an opinion overwhelmingly favored use-based solutions. Each of the top three choices — gas tax (60.2%), mileage driven (19.9%) and toll-ways (13.4%) — place the burden of paying for infrastructure resources on those who use those resources.

New Equipment Emission Standards

As more Tier IV equipment makes its way into the marketplace we also wanted to better understand what executives are experiencing with respect to performance and price. More than three-fourths (76.9%) of construction executives said that the new Tier IV equipment is performing as well as or better than previous generations of equipment. This is welcome news because contractors also agreed that the price point for this new equipment is much higher than what had been anticipated. Our conversations with contractors and dealers show a 10% to 12% price increase compared to equipment of previous generations.

Conclusion

When looking at where the construction industry has come since 2010 and 2011, we are impressed by the remarkable improvement in the levels of construction activity and other measures of industry health. Companies appear more willing to commit to hiring new employees, they report greater levels of construction activity and there has been a general increase in construction equipment use whether through purchase or rental. Interestingly, the potential hazards to domestic growth that we feared in previous years seem much less threatening as we close out 2014. As shown by the second quarter and third quarter GDP reports, the underlying fundamentals of the U.S. economy have been firming up and all indications are that it will continue to grow through 2015 and 2016. All of these factors bode well for the construction equipment industry and lead us to believe that there will be strong opportunities in the construction market for the year ahead.

John Crum has worked in the construction equipment finance industry for the past 20 years, holding a variety of positions in sales and credit management. He joined Wells Fargo Equipment Finance in May 2006 and currently serves as national sales manager of its Construction Group, overseeing originations activities in the U.S. and Canada.