Construction Activity Expected to Decline 6.3% Next Year
According to Bill Toal, chief economist for the Portland Cement Association, the U.S. construction industry can expect an overall decline of 6.3% in activity next year due to the economic downturn. Still, "by historical contrast this would put construction spending back to slightly above 1998 levels, which were record levels of activity," he said.
"We expect a 10% decline in private, nonresidential construction spending next year after a 5.4% drop this year," Toal said. He predicts the construction industry overall will see a 4.2% increase by 2003.
U.S. Construction OutlookToal attributed the decline in construction activity in part to a "hole in the economy.” “The economy was already weakening significantly before the events of September 11." Forecasts have been revised down further because of those events. For the overall economy, Toal revised his spring forecast of 1.7% growth in economic activity down to 1% growth for 2001.
He revised his overall economic growth rate predictions for next year to 1.8% down from his prior forecast of 2.7%. In contrast to the declines in residential and nonresidential construction, public construction was predicted to grow slightly, albeit at a much slower rate than it has for the past two years.
Retail/Industrial/Commercial OutlookGlenn Mueller, professor, John Hopkins University Real Estate Institute and managing director, Real Estate Investment Strategy, Legg Mason, Inc., said there are two ways to look at how construction is faring: the physical realities of demand and supply; and the financial realities of where capital is flowing and how it affects pricing. For example, demand and supply in the office sector has reached some equilibrium after several decades of dramatic swings in what was available and who wanted it, he said. Those levels will remain somewhat balanced though both sides will be lower for the next year or so, he said.
Federal Construction OutlookEdward Feiner, FAIA, chief architect, U.S. General Services Administration, said public architecture no longer consists of "finding ways to build great boxes," like most federal buildings used to be. Many old buildings are being retrofitted for a more modern look, as well as better building security and seismic protection. Feiner said the events of September 11 and the bombing of the Oklahoma City federal building will not frighten government building out of downtowns.
Major Projects and Trends for 2002A panel of leading design, construction and engineering experts outlined the trends for the built environment based on recent and planned projects.
Edward Friedrichs, FAIA, president and CEO of Gensler, mentioned several adaptive reuse projects of structures that had not attained sufficient occupancy rates, such as turning a large plant into a mega-church.
Ray Messer, PE, president and chairman of the board for Walter P. Moore, said new business is coming in from many areas of the country that need to build up deteriorating infrastructure.
Pat Priest, CFO/Managing Director of The Beck Group, noted that early signs indicate changes in the basic design/engineer/estimate/construct process. Instead of acting in different "silos," companies are forming teams among its experts to deliver projects quicker, with fewer prices and at less cost.
Harold Adams, FAIA, chairman of RTKL, which just won a contract to work on replacing parts of the Pentagon, observed that while the rest of the world is seeing slowdowns, China is an active market.
Stephen Fiskum, COO of Hammel Green and Abrahamson said one of the greatest challenges firms face is to maintain strong balance sheets by containing expenses instead of looking for new ways to invest.