The recession is expected to keep its grip on costs through the second half of this year, despite a shift in what is affected. Construction costs heavily influenced by residential construction have already bounced up from historic lows, but that may be coming to an end, along with the expiration of federal tax credits for first-time homeowners. Costs associated with the nonresidential building markets have bottomed out. But while there is not much room for further declines, there is also very little upward pressure from either the labor or materials markets on the nonresidential building cost indexes.
In the latest update of its 2010 construction-markets forecast based on actual construction starts through April, McGraw-Hill Construction still is predicting a 2% annual decline in the dollar value of the non-residential building market this year. “We’ve become a bit more pessimistic on this year’s prospects for the commercial and educational building markets,” says Robert Murray, MHC’s chief economist. He expects to see annual declines this year of 18% for manufacturing buildings, 12% for hotel and motel work, 6% for both office and school buildings and 5% for commercial structures.