The recovery in Hawaii’s construction industry is gaining momentum and is on track to continue through at least 2015, led by a flurry of new condominium projects in the pipeline and the expected restart of work on the Honolulu rail project, according to a report scheduled for release today by the University of Hawaii Economic Research Organization.
Construction activity finally turned the corner last year after a five-year slump that saw more than one-quarter of jobs in the industry disappear.
"Home building, retail and visitor industry upgrades, the ongoing boom in photovoltaic installations, and yes, rail, will combine to drive a strong industry expansion over the next several years," the report’s authors wrote.
However, they cautioned that sharp gains in the issuance of building permits — a precursor of future construction activity — are starting from depressed levels and are still well below their peak of the last construction boom in the middle of the last decade.
The health of the construction industry is followed closely in Hawaii because it has more of an impact on the overall economy than it does on the mainland. The construction sector accounted for 5.6 percent of Hawaii’s economic output in 2011, compared with 3.5 percent nationally.
UHERO is forecasting the number of construction jobs, which averaged 29,500 in 2012, will rise to 31,600 this year and to 38,600 by 2015. Spending from construction is expected to climb from $6.9 billion in 2012 to $7.5 billion in 2013 and $10.5 billion in 2015.
UHERO also is predicting the Honolulu median single-family home price to rise steadily from $650,100 this year to $815,000 in 2015.
"With interest rates remaining at very low levels, foreclosure activity abating, and economic fundamentals strengthening, we now expect housing construction to pick up sharply this year and next," although at levels much lower than the last home construction boom, according to the report.
Recent news that two planned condominium projects for Kakaako sold out in a matter of days is encouraging for the industry, said Lance Wilhelm, senior vice president at Kiewit Building Group in Hawaii.
The projects, One Ala Moana and 801 South Street, are two of seven high-rise condos or apartment towers planned or under construction between Waikiki and Kakaako.
"I’m cautiously optimistic," Wilhelm said.
"It’s creating a lot of activity for developers, designers, engineering companies and contractors," he said. "Even if half of the planned high-rises get built, it will put a good number of people to work."
Other planned projects include the 400-unit Symphony Tower across from the Neal Blaisdell Center, the 495-unit Ritz-Carlton Residences Waikiki Beach and the redevelopment of the Central YMCA. Projects already under construction include the 204-unit Halekauwila Place, the 341-unit Waihonua at Kewalo and the 176-unit Holomua condominium tower in Makiki.
Wilhelm, whose company is the main contractor on the Honolulu rail project, said he expects work to resume later this year after several delays. The $5.26 billion project was put on hold after the discovery of iwi forced the Honolulu Authority for Rapid Transit to perform an additional archaeological survey along the entire 20-mile route of the project. The fieldwork for the survey was completed in January, and HART must now complete a detailed archaeological inventory survey.
"Aside from rail, publicly financed construction will be only a middling contributor to growth over the next several years," according to the UHERO report.
Ron Taketa, financial secretary of the Hawaii Carpenters Union, said he expects construction activity to pick up in the second half of this year and into 2014.
"We’ve seen a lot more contractors and developers pushing through the entitlement process, but it hasn’t translated into actual construction yet," he said.
Many of the larger projects, such as the proposed Ho‘opili and Koa Ridge residential developments on Oahu, still face opposition from environmental groups, Taketa said.
Unemployment among carpenters, while not as bad as during the 2008-09 recession, is still in the 40 percent range statewide, Taketa said. The jobless rate is higher on the neighbor islands, which haven’t benefited as much as Oahu from military construction contracts and some of the high-rise construction projects, he said.
"Things are getting better, but we still have a lot of work to do," Taketa said.
