LCK Report: South Carolina Construction Activity is Up

Research & Forecast Report
Q3-2018 SOUTH CAROLINA | CONSTRUCTION TRENDS

Key Takeaways

• Statewide construction activity has risen from one year ago and the market has an optimistic business climate; therefore, positive construction activity is expected into 2019.
• Construction costs across all sectors are expected to continue rising in South Carolina. Volatile material pricing and increased demand on limited contractor resources are key factors.
• LCK Construction Tip: Pre-engineered metal building pricing and lead times continue to rise. Structural steel framing or load-bearing masonry construction will offer comparable alternatives.

Overview

Construction Starts: Statewide construction starts are 0.63% higher than starts in the third quarter of 2017. Across the state, 25,305 project starts occurred during 2018, valued at $12.54 billion. In the third quarter, 8,306 construction project starts were recorded.

Construction Workforce: According to the Bureau of Labor Statistics, as of September 2018, there were 98,400 construction employees in South Carolina, representing 4.66% of the total non-farm employment. Construction employment decreased by 100 jobs over the last 12 months; however, employment in the major markets is largely increasing.

U.S. Material Pricing: Pricing volatility continues for steel, asphalt and gypsum products, with pricing increases averaging 2.9% to 8.2% over the last three months. During the same time, lumber and plywood pricing has decreased by 7.4%, countering sharp increases earlier in the year. Volatility is expected to continue for the foreseeable future.

U.S. Construction and Development Lending: According to the FDIC, construction and development loan volume totaled $347 billion as of June 30, 2018, up $23 billion since June 30, 2017. The quality of outstanding loans improved with non-current loans representing just 0.48% of total outstanding loans compared to 0.62% as of June 30, 2017.

U.S. Architectural Billings: According to the AIA Architectural Billing Index, architects in the South are the busiest in the nation. The index for the Southern region is currently at 57, indicating a strong probability of continued growth in future construction starts. (A score of greater than 50 indicates increased billing activity.)

Key Market Summary

Charleston Metropolitan Area

Construction Starts: Total year-to-date construction starts in Charleston dropped 1.94% from September of 2017. The commercial sector saw strong starts during the third quarter of 2018. Education starts will continue, as Charleston County School District’s 2017-2022 Capital Program is on-going. The healthcare sector is strong despite low starts. MUSC’s Children’s Hospital, reported as a start in 2016, will be under construction until mid-2019. DHEC recently gave approval for a new hospital in the Charleston area.

Construction Workforce: The Charleston-North Charleston construction workforce has 21,600 workers, a 7.46% increase year-over-year. From September 2017 to present, 1,500 workers were added.

Columbia Metropolitan Area

Construction Starts: Total year-to-date construction starts in Columbia are up 12.99% from this time last year. Starts have been strong in the multifamily and manufacturing sectors. Education starts will be up over the next three years, as two significant public education bond referendums have been approved by voters. Healthcare starts appear to be lower due to Lexington Medical Center’s expansion, which was reported as a start in 2016. It will be under construction until mid-2019.

Construction Workforce: The Columbia construction workforce has 18,400 workers, a 4.50% increase year-over-year. From September 2017 to present, 800 workers were added.

Greenville-Anderson-Mauldin Metropolitan Areas

Construction Starts: Total construction starts in Greenville for the third quarter of 2018 and year-to-date are down 37.71% and 12.44%, respectively. Commercial starts have remained steady and the multifamily sector had strong third quarter starts. Manufacturing starts are down, but work underway is strong. Low education and healthcare starts are not alarming, as these sectors are cyclical and will trail multifamily and commercial growth.

Construction Workforce: The Greenville-Anderson-Mauldin construction workforce has 18,900 workers, a 5.00% increase year-over-year. From September 2017 to present, 900 workers were added.

Spartanburg Metropolitan Area

Construction Starts: Start patterns in Spartanburg are similar to the Greenville-Anderson-Mauldin area. Total construction starts in Spartanburg for the third quarter of 2018 and year-to-date are down 35.86% and 18.42% respectively. The commercial and multifamily sectors, however, show year-to-date start growth. Lower manufacturing starts are likely due to multiple, high-profile projects starting in previous years and currently remaining under construction.

Construction Forecast

Construction activity is projected to rise well into 2019 due to an optimistic business climate, increasing population, high demand for industrial structures and public school building programs. Construction pricing will likely continue to increase due to increased demand on limited contractor resources, a growing deficit in skilled trades workers and volatile material pricing. Overall construction starts, particularly in the commercial and manufacturing sectors, may begin to decline as rising prices drive owners to renovation and expansion in lieu of new construction. As demands on resources increase, availability will continue to decrease, resulting in extended project durations. Owners may face additional premiums in order to complete jobs within typically understood schedules. Procurers of construction are encouraged to set a realistic budget and schedule expectations and to examine alternative and creative delivery methods and materials.

Professional project management services are a valuable resource for navigating the construction process in today’s marketplace.