Greetings for 2010! On behalf of Reno Contracting I wish you all great health and happiness in this year. We've all been keeping our eyes and ears open for the economy, especially how it's impacting the building industry. Although this year will be challenging, out of the data I've researched, we're starting to see some positive improvements in the federally funded sector, and we are seeing more opportunities for sustainable building services. I've outlined what I think are the key points that will impact and steer our course this season.

What the Reports are Saying:

December was the eighth-consecutive month gain in Leading Economic Indicators, showing optimism in growth and improvement for 2010. GDP was positive, seemingly indicating that recovery is on the way. However, nearer-term the construction industry doesn't look to fare as well. The December 2009 ENR survey of 941 national firms from the Top List of 2009 showed major firms are pessimistic about a fast industry rebound. The confidence index was 31 out of a possible 100 (one point lower than the previous quarter), with an index of 50, meaning a stable or neutral market. Seventy-four percent of the firms surveyed felt the industry would improve in three years, while 45% foresaw improvement in 12-18 months.

The Economic Watch in October '09 noted that setting the public sector aside, no net gain in private sector employment is forecasted for our coastal communities. "Job creation actually resumes in the late spring of this year, but appears more convincing in 2011 and more regular in 2012", according to Mark Schniepp, Principle of California Economic Forecast. California will lag the country by one quarter in recovery due to a lack of restraint on public spending and no rainy day fund. Schniepp predicts recovery next winter for Southern California. McGraw Hill Construction predicts an even more difficult year in 2010, with a drop of 6% in value of non residential project starts. Office construction declines another 3% due to high unemployment and businesses curtailing expansion. Since companies are reining in expenses for travel and we're taking fewer vacations, hospitality projects are declining. Retail has also hit the lowest level of new project starts in 50 years and the drop in demand for consumer goods has pummeled the manufacturing sector construction start outlook. Health care project starts suffered in 2009 with tight credit market but should see 72 million square feet in project starts for 2010, a 2% increase in starts.

There has been a lot of activity in the publicly funded sector, but according to McGraw Hill the impact of cautious spending, unemployment and decline in home values will be felt in 2010 as tax revenues suffer. Education project funding is likewise challenged with lower property taxes and declining endowments. Federally funded projects are fairing far better. The American Recovery and Reinvestment Act (ARRA) committed contracts for $4.4 billion on street and bridge construction. Public buildings received a big boost from the ARRA in 2009 and the project starts will increase 8% in 2010. A senate vote on Dec 13th gave congressional approval to a $446.8 billion spending package which includes $58.5 billion for transportation/highways and $25.5 billion for construction and remodel of facilities/buildings.

The amount of federal work locally, here and coming, must have a positive impact on our economy; unemployment will flatten out and hopefully by this time next year it will be on a positive gain track. The financial lending standards are no longer tightening, and there should be more funds available to the entrepreneur as 2010 progresses and 2011 arrives.

Investment in Sustainability:

On the positive side, we are seeing an increase in the investment of sustainability with funds and grants available for the creation of green jobs since federal and most state projects are now being required to meet at least a Silver LEED level. There also continues to be funds and tax incentives available for Solar PV and other alternative energy programs. Reno Contracting's green practices division, RENO ESP, is currently engaging our local Associated General Contactors (AGC) to provide sustainability training classes over a 12-month period, which will help our local contractors and workers learn the "tools" of the future. We hope to provide similar services this year to SDSU and other select colleges and universities, as well as southern California municipalities.

This year will continue to set a fresh course for Reno Contracting. We are in a new economy and the markets we were successful in before won't be the same in the future. Construction will continue, like most business, to be price and cost driven, but there is a transition underway. Government mandates, demands of employees for green work space, heightened awareness of our impact on the environment and common sense is shifting focus and placing more emphasis on building performance and long term costs and impacts. Throughout commercial and residential construction today, new technologies, materials and ideas are being applied to enable buildings to perform better for occupants, owners and the environment. It is changing our industry quickly and will demand a wider breath of technical knowledge of materials and systems and their performance relating to energy efficiency, occupant comfort and productivity and sustainability. When the economy and new building construction picks up, there will be even more demand for a General Contractor well versed in this sustainable and technologically-advanced construction world. Reno Contracting and ESP are those sources and will be for the long haul.

I hope this coming year brings you many exciting opportunities as we see the industry shift in new directions, even though we're not out of the woods yet. As I like to say, "The difference between a stumbling block and a stepping stone is how high you lift your feet."

Best wishes,

Walt Fegley
President, LEED AP