Photo by Bruce Buckley
Robert Murray, vice president of economic affairs for McGraw-Hill Construction, sees no upswing in construction volume in 2012.

A fifth straight year of decline is how 2011 will go into the record books, with no growth likely next year. That's the sobering forecast from McGraw-Hill Construction.

In light of the sluggish economy, construction spending continues to limp along in a depressed state with few limited signs of hope on the horizon. McGraw-Hill Construction, the parent of ENR, estimates that 2011 will close out with a 4% drop in total construction starts to $410 billion, marking the fifth year in a row of decline. Analysts forecast that 2012 will see essentially flat activity with an estimated $412 billion in starts.

The forecast was announced during McGraw-Hill Construction’s Outlook 2012 Executive Conference in Washington, D.C., Oct. 19.

Murray says that given the current fragility of the economy, overall recovery may not come until 2013 or 2014. “It’s going to be another year on this extended bottom,” he said. “The corner is being turned, but ever so slowly and in an uncertain manner.”

The forecast dashes previous hopes for a recovery in 2011. Last year, McGraw-Hill Construction predicted an 8% increase in total construction starts to $445.5 billion.

Robert Murray, vice president of economic affairs at McGraw-Hill Construction, credited much of the decline to decreased activity in the single-family housing, public works and institutional building sectors. Single-family housing, in particular was expected to buoy the market with a 27% rise, but instead dropped 5% to 94.7 billion.

Murray notes that recovery is hampered by a sluggish economy where GDP is expected to drop from 3% in 2010 to 1.6% in 2011. Meanwhile, unemployment remains around 9%.

Still, Murray is hopeful that single-family housing will improve to $104.6 billion in 2012—a 10% increase. Low mortgage rates and moderate job growth could fuel the uptick, he adds.

Bright Spot: Multifamily Housing

Through the down market, multifamily housing continues to improve. Starts are expected to rise 13% to $23.6 billion this year—the second consecutive year of double-digit growth. Next year, the pattern is forecast to continue with 18% more spending to $28 billion.

“This is the one real bright spot for the building sectors,” Murray said.

Commercial building is bouncing back from severe drops with an estimated 6% rise to $43.9 billion in 2011 and another 8% increase to $47.4 billion in 2012. Even at the level, spending remains less than half of the 2007 peak of $100.8 billion.

In 2010, office construction starts tallied 56 million square feet—the lowest level of activity since 1960, Murray added.


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