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Forecast Predicts 2009 Construction Starts at $463.1 Billion, Down 15 Percent
April 3, 2009

Still no good news for commercial construction, as McGraw-Hill's 2009 Construction Outlook Spring Update reported that commercial building in 2009 is expected to drop 27 percent-steeper than the 17 percent slide reported last year. The tight lending environment has made it difficult to obtain project financing, leading to more projects being deferred or cancelled. While all commercial works will register declines in 2009; the most severe retrenchment anticipated is for hotel construction.

The recently released update from McGraw-Hill Construction provides updated 2009 forecasts of construction starts for various project types.

"The construction industry is facing divergent forces in 2009," said Robert Murray, vice president of economic affairs, McGraw-Hill Construction and author of the forecast. "The economy has weakened substantially, and despite all the efforts last fall directed at thawing frozen credit markets, there's yet to be any sign that lending conditions for construction have improved. On the plus side, the federal stimulus bill is now in place, which will provide quick support to public works this year."

Major findings of the forecast include:

  • New construction starts for 2009 are estimated at $463.1 billion, down 15 percent, but cushioned by support provided by the recently enacted American Recovery and Reinvestment Act of 2009;
  • Public works will see the most immediate benefit from the stimulus act, with construction starts climbing 10 percent. Without the stimulus funding, McGraw Hill estimates that public works in 2009 would have fallen 10 percent, restrained by the deteriorating fiscal health of state and local governments;
  • Institutional building in 2009 will retreat 6 percent, as the weak financial environment takes its toll on educational and healthcare facilities. The stimulus funding will likely provide a lift to military facilities and energy upgrades for federal buildings, moderating this year's overall institutional decline.
  • Residential building in 2009 will drop an additional 31 percent, continuing the downward trend that's been underway since 2006. Similar declines are expected for single-family housing (down 30 percent) and multifamily housing (down 31 percent). Steps taken in early 2009 to address the foreclosure problem should help to ease the rate of descent for housing as 2009 progresses.

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