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Construction outlook update from AIA

Post Time:May 04,2009Classify:Industry NewsView:169

Nonresidential to see moderating decline during rest of 2009

Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, New York, said construction starts will continue to decline through the remainder of 2009, but at a slowing rate. Murray spoke during the presentation, The Construction Outlook: Implications for Architecture Firms, May 1 at the American Institute of Architects Convention, in San Francisco. Overall construction starts should decline 15 percent to 17 percent during 2009, with commercial construction falling 27 percent, institutional 6 percent, multifamily housing 31 percent and single-family construction 30 percent, Murray said. The public works segment that includes road and infrastructure is expected be the only positive construction segment in 2009, thanks in large part to the stimulus package, he said. Each nonresidential segment looks drastically different today than during the peak years in 2006 and 2007. Multifamily construction witnessed incredible growth at its peak, with major condominium projects popping up in large quantities in cities across the country. The overbuilt condo markets have caused the multifamily sector to crash in numerous cities, including Miami and Las Vegas that both saw multifamily starts fall 57 percent in 2008. “Three years ago, it was all condo projects. There is a very different picture now,” Murray said, as the multifamily projects going forward in 2009 are primarily apartments. Retail construction, which saw record highs, is going through a “major, major correction,” Murray said. “Firms including Linens ‘n Things, Circuit City and Sharper Image went bankrupt, leaving empty space, and major players such as Wal-Mart and Home Depot are shrinking their space.”Retail starts, expected to be down 33 percent in 2009, will likely decline by an additional 5 percent to 10 percent in 2010, Murray said. Hotel starts, which managed to stay relatively strong throughout 2008, will plunge a forecasted 38 percent in 2009, Murray said, as hotels and motels face occupancy rates of less than 60 percent. Growth in the office sector was more measured during the build-up, making some economics predict that the correction would be less severe than in other nonresidential segments. However, office starts still faced a major decline in 2008, falling 25 percent, and will likely see a similar drop of 24 percent in 2009, Murray said.The strength in the new office construction resides in government office buildings, such as the $992-billion U.S. Army headquarters building in Alexandria, Va., and a $315 million military department of investigationbuilding in Quantico, Va., both breaking ground this quarter. “These government buildings are becoming a more important part of this segment,” Murray said. New commercial office construction won’t gain much traction from the stimulus, Murray said, but renovation could be a different story. “Renovation and retrofit should stay the same level or many even grow,” he said, as the stimulus provides funding for increasing building efficiency. Institutional building will not see the same level of decline as the commercial sector, but will lose momentum, Murray said. “In terms of the level of activity, it’s not that bad. We’re coming from record levels in 2008. So, the pullback is not going to be as severe as we expected,” he said. Educational buildings, which grew 1 percent during 2008, are expected to drop 12 percent during 2009. Health care, up 7 percent in 2008, should fall 16 percent in 2009. Public buildings, boosted by the stimulus package, should stay even with last year. Looking further into the future, Murray expects commercial construction to stay slow through 2010, with multifamily and single-family housing seeing growth. “We see some potential in 2010, with a modest increase,” Murray said.

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