What does 2006 look like for the construction industry in the southeastern United States?

Across the region, most agree, there are many sound reasons for optimism. Factory construction is generally up, and multifamily construction is doing well — particularly in Florida. Manufacturing-related construction continues strong in parts of Alabama, particularly around auto industry facilities. Other strong segments in many areas of the region include retail construction, hotel construction and education construction, as the Southeastern states continue to deal with the demands of a growing population. Growth brings revenue, too, which should continue to provide funds for county and local construction programs. But office construction, health care construction and power plant construction look like they may be down a bit.

In the Southeast, as elsewhere, some of the biggest news has to do with the passage of the highway bill and its impact on road and highway construction. Late last year, for example, Florida Governor Jeb Bush unveiled more than $3 billion in transportation improvements as part of growth management reforms signed into law last June. The "pay-as-you-grow" proposal overhauled the state's growth management laws for the first time in two decades to ensure roads, schools and water are available to meet the needs of Florida's growing communities. The transportation funding will impact the industry over a period of years and will be used to relieve a backlog of road projects and improve major transportation corridors across the state. Bottom line: The state's work program, large to begin with, is destined to be even bigger. Highway contractors are looking forward to more than $3 billion just in FDOT work — and that doesn't include county and local projects on tap for the new year.

Alabama highway contractors are also looking at a successful year based on a federal financial package that represents a 30-percent increase in federal money. Alabama contractors enjoyed about $640 million in construction spending in FY '04–'05, and the state's highway contracting industry can expect to see total spending for Alabama DOT construction in FY 2005–2006 in the neighborhood of $650 million. Industry observers praise the state's DOT for going after maximum utilization of funding, and the state's highway construction industry is sure to benefit with future projects such as a new I-10 bridge in Mobile — a $100-million undertaking. And other segments of the construction industry, fed by the state's growing auto industry, expanding medical facilities, and growth in many other areas seem poised for a very good year in 2006 as well.

Georgia's highway program, which fielded $1.14 billion in construction contracts in fiscal 2005, looks to be "online to put out $1.5 billion worth of projects across the state this year," according to State Transportation Board chairman David Doss. An estimated 90 percent of the projects to be let this year are ready to go, with right-of-way already acquired.

Tennessee appears to have lost federal highway funding compared to last year — around seven-tenths of a percent, from about $765.9 million in FY 2005 to about $760.9 million in FY 2006. Threats to state funding continue to loom, too, prompting some to predict a highway funding year in Tennessee that will be flat at best.

For the Southeast, the other big news in the last couple of years has come in the form of hurricanes — and for contractors across the region, the big question now is how the storms will impact the area's construction economy in 2006 and beyond.

Rebuilding in the wake of the storms is already bringing construction work to the region, particularly on the highway and infrastructure side as state DOTs in Alabama and Florida work to restore damaged roads and bridges. But roads are not the only part of construction impacted by the storms. Structure repair, renovation, and even rebuilding are also likely to be busy markets for the foreseeable future in many storm-ravaged areas seeking to repair or replace damaged properties.

Interestingly, there are predictions that construction labor supplies in non-affected areas of the southeast may actually benefit from the storms. The reason? Something like 1.5 million people were displaced by the storms, and one result has been what one industry observer described as a "massive and long term relocation of population." Some of those relocated people are construction workers. Faced with uncertainties about rebuilding in their former home areas, and drawn by areas with strong construction economies (areas like Tampa, for example) those workers are likely to bring much needed relief to many segments of the industry where skilled workers have long been in short supply. This may be particularly good news for highway construction in much of the southeast, where the problem is not a shortage of work but instead a shortage of workers.

Other effects of the storms include shortages of some materials, such as PVC pipe, something which contractors will experience as increased costs. But in the area of forest products there may also be unexpected positive impacts as fallen trees are cleaned up and processed for use in a variety of building materials. Equipment suppliers could benefit, too, and many expect to see an upswing in demands for many types of construction and trucking equipment.

As AGC's chief economist Ken Simonson put it, "You are as busy as you have been, and that will continue."