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Blog|June 9, 2021

Construction Industry News

A look at the top news and happenings shaping the construction industry in California.

Pandemic Slowed Ownership Transfer Plans in Industry, Survey Finds

The economic slowdown from the COVID-19 pandemic had a direct impact on the ownership transfer and management succession plans of engineering and construction (E&C) companies in the U.S. That is according to a recent study undertaken by FMI and the Construction Financial Management Association (CFMA).

Nearly 250 construction executives offered input to the “2021 FMI and CFMA Ownership Transfer and Management Succession Industry Survey.” Key results included:

  • 30% said economic slowdown would affect their ownership transfer plans.
  • 50% reported they DO NOT have an ownership transfer plan.
  • 66% identified successors won’t be ready for another three to five years.
  • 27% are uncertain to whom they will sell.

Among the bright spots identified in the survey: a continued shift towards employee stock ownership plans (ESOPs) and what FMI called “healthy mergers and acquisitions activity” as owners shift focus to third-party sales.

For more information or to read the entire survey, go to www.fminet.com.

Promising Sign from Dodge Momentum Index

A large increase in commercial building project planning activity in May led to a strong 9.1% increase in the Dodge Momentum Index – a “good sign that the economic recovery is starting to spread into the construction sector,” according to a recent report from Dodge Data & Analytics.

The Momentum Index inched up to 178.0 from the revised April reading of 163.2. This marked the strongest month-over-month increase since October 2017 according to Dodge, which also reported that institutional planning fell by less than one percentage point.

Several large data center, office and warehouse projects drove the index higher. Dodge reported that on a year-over-year basis, both commercial and institutional planning were up from May 2020, 28% and 47% respectively. Overall, the Momentum index was 41% higher than in May 2020.

A $450 million office campus in Los Angeles, CA was just one of more than 20 projects with a value of $100 million or more nationwide that entered planning during May, Dodge reported. The company is a leading provider of commercial construction project data, market forecasting & analytics services for the construction industry. It cautioned that while growth in planning is a good sign for the economic recovery, construction starts for 2021 continue to be negatively impacted by rising material prices and an ongoing shortage of skilled labor, leading to project delays.

CTC Approves Nearly $1 Billion in Projects

The California Transportation Commission (CTC) at its May 2021 meeting allocated more than $924 million for projects to improve critical transportation infrastructure throughout the state. According to recent release from Caltrans following the meeting, nearly half of this major investment – $458 million – comes from Senate Bill (SB) 1, the Road Repair and Accountability Act of 2017.

Some of the largest California projects approved by the CTC in May included:

  • Approximately $58.7 million in Eureka and Arcata for Eureka/Arcata Corridor Improvement from the Eureka Slough Bridge to Route 101/255.
  • $27.5 million for a project on U.S. Highway 50 in the city of Sacramento to clean and paint steel bridge girders within the I-5 5/50 interchange to prevent the oxidation of steel girders and prolong the service life of the bridges.
  • $100 million to replace the existing pavement, widen the outside shoulders, replace guardrail, and upgrade drainage systems on US 101 in Santa Barbara County.
  • A $15.9 million roadway rehabilitation project on State Route 119 in Kern County.
  • $27.5 million to the Los Angeles County Metropolitan Transportation Authority for the acquisition of systemwide Light Rail Vehicles, including 78 vehicles and the option to buy an additional 39.
  • A $17 million pavement rehabilitation/upgrade project in Tuolumne County.
  • A $27.25 million in projects to rehabilitate roadway along State Route 78 in the community of Ramona in San Diego County.

In addition to those and other projects, Caltrans also reported to the CTC on recent emergency and safety projects, including $13 million to rebuild 150 feet of Highway 1 at Rat Creek in Monterey County following a January mudslide. Caltrans completed this emergency repair project nearly two months ahead of its target date, reopening the highway to traffic on April 23, 2021.

SB 1 funding provides $5 billion in transportation funding annually split between the state and local agencies. For more information about other state transportation projects funded by SB 1, visit www.rebuildingca.ca.gov.

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