Despite signs that the overall U.S. economy is beginning to improve, nonresidential construction spending is expected to decrease by 13.4% in 2010 with a marginal increase of 1.8% in 2011 in inflation adjusted terms, according to the latest American Institute of Architects semi-annual Consensus Construction Forecast.
Commercial and industrial projects will continue to see the most significant decrease in activity, the forecast says. Thanks, in part, to federal stimulus spending, institutional building categories will fare better over this period.
�When economies emerge from this prolonged recession, recovery for nonresidential construction activity typically takes longer,� says AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. �Hardest hit will be the commercial and industrial sectors with projected declines in the 20% range for 2010 in most building categories. Led by the healthcare market, the institutional sector will see far less dramatic declines and should help lead the construction industry into recovery in 2011.�
The AIA Consensus Construction Forecast Panel, a survey of the nation�s leading construction forecasters, is conducted twice a year with the leading nonresidential construction forecasters in the U.S., including, McGraw Hill Construction, Global Insight, Moody�s economy.com, Reed Business Information, the Portland Cement Association, and FMI. The purpose of the Consensus Construction Forecast Panel is to project business conditions in the construction industry over the coming 12 to 18 months. The Consensus Construction Forecast Panel has been conducted for 12 years.
Meanwhile, in other construction news, construction employment declined in 324 out of 337 metropolitan areas over the past year as spending on construction projects dropped by over $137 billion in November to a six-year low of $900 billion, according to a new analysis by the Associated General Contractors of America of federal figures.
�Private nonresidential construction is in freefall, with every category except private power construction down sharply compared to a year ago,� says Ken Simonson, the association�s chief economist. �Those cuts are causing layoffs in virtually every part of the country for tens of thousands of skilled construction workers.�
Simonson notes new Census Bureau figures released recently show developer-financed construction suffered the largest decline in spending between November 2008 and November 2009. He adds that private lodging investments were down 46%; retail, warehouse and farm spending were down 41%; and private office construction investments were down 39%. A recovery in homebuilding may spark some improvement in retail construction later this year, and higher education and hospital construction may come back in the second half of 2010, the economist suggests.
Simonson notes that public construction benefitted from federal stimulus funds, with a year-over-year increase of 2.7%. He predicts, however, those gains will continue to be tempered by sharp cutbacks in projects funded directly by states, local governments and school systems.
Simonson says the declines in investments were leading to sweeping industry layoffs. The city of El Centro, Calif., lost a larger percentage of its construction work force (36%) from November 2008 to November 2009 than any other metropolitan area, according to the latest Bureau of Labor Statistics figures. The agency includes mining and logging with construction in most metro areas to prevent disclosure about industries with few employees, Simonson notes.
Other areas experiencing sharp declines in construction employment during the year include Kokomo, Ind. (31%); Wenatchee-East Wenatchee, Wash. and Reno, Nev. (both 28%); and St. George, Utah and Grand Junction, Colo. (both 27%).
Of the six metropolitan areas with an increase in construction employment during the past 12 months, only two areas had gains of more than 100 jobs: Harrisburg-Carlisle, Pa. (1,500 jobs, 12% gain) and Tulsa, Okla. (700 jobs, 3% gain.) Four metro areas had gains of 100 jobs each in construction: Anderson, Ind. (6%); Columbus, Ind. (5%); Bismarck, N.D. (3%) and Fargo, N.D., including nearby areas in Minnesota (1%).
|Market Segment Consensus Growth Forecasts|| |
|Commercial / industrial|
|• Industrial||-24.3%|| |
|• Office buildings||-18.6%||11.8%|
• Amusement / recreation
• Health care facilities
• Public safety