In other words, the economy won’t crash, but it may gear down a notch or two. Construction may continue to grow, just at lesser levels than have been enjoyed in recent years.
FMI predicts that nonresidential building construction will rebound slightly to see 4% growth in 2000, after inching up only 1% in 1999. Strong demand for technologically and esthetically up-to-date facilities, paired with low vacancy rates should explain why new, privately owned office and professional buildings should enjoy an eighth consecutive year of growth in 2000.
While CB Richard Ellis reports that U.S. office vacancy rates have risen slightly to 9.6%, FMI asserts this is still low by historical standards. Areas reporting high vacancy rates include Riverside/San Bernadino, CA (20.5%); Oklahoma City, OK (20.4%); and Dallas (17.3%). The two lowest rates were reported by Seattle, Washington (4.9%), and Austin, TX (6.2%). Overall, office construction grew $5.3 billion, or 16% in 1999, and it is expected to rise another $3.4 billion, or 9%, in 2000.
Looking deeper into the analysts’ crystal ball, nonresidential improvements will rebound with a 3% increase this year, after a 5% swoon last year. This represents a dollar growth of almost $2.8 billion. Elsewhere, educational improvements will climb another 9% in 2000. Other growth activity expected within the nonresidential building improvements sector includes retail (4%), and healthcare (3%). FMI cites overcrowding in schools and some facilities in dire need of upgrades as signs that school construction will rise 9% in 2000. That represents a slight drop for private educational buildings (-2%), but a larger rise in public educational construction (11%).
Providence, RI; Baltimore, and Niagara Falls, NY are expected to lead the charge of continued, but slightly slower (9%) growth in hotel and motel construction. And after a stagnant year, the new construction of public safety, administration, and other miscellaneous public buildings is predicted to regain its momentum with a 4% improvement.
Establishing a correlation between new residential development and new retail construction, FMI says that the tapering off of residential construction will mean less growth (3%, down from 5%) for new retail construction in 2000. Drops into negative territory are also expected for the amusement (2%) and warehouse (less than 1%) construction sectors this year. Finishing the downside, construction of new industrial buildings is also expected to fall another 5% after a very weak year in 1999.
On the upswing, utility construction may ride the ubiquitous activity in telecommunications to another 6% hike this year, while banner years are seen on the horizon for water supplies (13%) and sewer systems (10%).
All in all, the FMI report reminds us that everything brings opportunities. The new year is stacking up as a bit more of a crunch, and if you’re ready, you’ll be more able to take advantage of what’s out there.