Commercial Construction is Turning the Corner
November 2, 2012

by Tara Taffera, ttaffera@glass.com and Kaitlan Mitchell, kmitchell@glass.com

With extreme discounter stores such as Family Dollar and Dollar General rapidly expanding, along with renovations increasing, store construction is back on track for positive growth after a steep decline in 2008 through 2012, according to Robert Murray, vice president, economic affairs for McGraw Hill Construction (MHC). Murray made his predictions kicking off his eagerly anticipated economic forecast at the recent MHC Outlook Executive Conference. As a whole, news for commercial construction is positive, said Murray, who reported that more large-scale architectural projects are reaching the start stage, and predicted moderate growth in 2013.

"The level of uncertainty is greater than we have ever seen," said Murray. "But there are bright spots you can hang your hat on."
Murray noted 12 large-scale construction projects ranging from $40 million to $400 million in value with an expected commencement year of 2012. Topping the list was Macy's Herald Square Renovation with a projected value of $400 million, followed by Linq Observation Restaurant and Entertainment Venue with an estimated value of $300 million and Winter Garden's renovation with a value of $250 million. Murray continued on to list specifics about individual construction sectors.

- Warehouse construction also saw healthy percentage growth in 2011 through 2012. Vacancy rate remained high at 13.1 percent in the 2012 third quarter but fell slightly from 2010 second quarter's results of 14.5 percent.

- Healthcare facilities fell sharply in 2012 and are still recovering from tight credit conditions in 2009. However the sector is still supported by the ongoing need to replace aging facilities and the growth of the elderly population.

- Public buildings received continue to retreat, affected by the winding down of stimulus support in combination with diminished federal spending.

- Airport terminal work in square footage is down due to renovation work.

- Plant construction has weakened once again in 2012 from a trade slowdown.

Although Murray's forecast is positive, challenges still remain including state budget shortfalls that continue to have an impact; for example there are a smaller number of schools being built. He also said slowed construction of office buildings is "problematic" due to tight credit conditions. "Certainly the corner has turned for the long depressed commercial market," he said. "It's a subdued upturn but it is there."