Significant Increase in Nonresidential Construction Activity Expected in 2007

The nonresidential construction market is expected to increase by almost 7 percent this year in inflation adjusted terms, following nearly 6 percent growth in 2006, according to the American Institute of Architects (AIA) semi-annual Consensus Construction Forecast, a survey of the nation's leading construction forecasters. With balanced growth in the commercial/industrial and institution sectors, the report forecasts strong construction activity in office buildings, hotels and health care facilities.

"Unless there is a significant downturn in the overall U.S. economy, the prospects for nonresidential construction activity are very favorable," said AIA chief economist, Kermit Baker, PhD, Hon. AIA. "The high level of projected activity will help offset some of the effects of the slumping residential market."

According to the report, the following segments are expected to grow this year:

Commercial/ Industrial

  • Hotels: 13.1 percent growth
  • Office buildings: 9 percent growth
  • Retail: 3.5 percent growth
  • Industrial: 5.4 percent growth

Institutional

  • Hospitals and health care: 6.8 percent growth
  • Public safety: 4.5 percent growth
  • Education: 4.2 percent growth
  • Religious: 2.6 percent growth
  • Amusement/recreation: 9.9 percent growth

"Oil prices have been moderating, and the large spikes in building material costs seem to be behind us for this cycle," added Baker. "However, prices for asphalt, copper, steel, aluminum and cement remain much higher than a year ago. If inflation in the broader economy remains under control, and the economy stays in a slow-growth mode, that could lead to a reduction to short-term interest rates."

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