Market Forecast to Increase 11 Percent in 2010
October 19, 2009
When Robert Murray, vice president of economic affairs for McGraw
Hill Construction, offered his annual construction forecast last
Friday to attendees of McGraw Hill's annual Construction Outlook
Conference, there was a great deal of bad news to report, mainly
consisting of large drops in virtually all construction segments
in 2009. But there were a few glimmers of hope including the fact
that the level of construction starts in 2010 is expected to climb
11 percent to $466.2 billion, following the 25 percent decline predicted
|Source: Robert Murray, McGraw Hill Construction
"This is the end of that lengthy cycle," says Murray.
"This year and next is the start of a new cycle."
"We are turning a corner," adds Murray who also notes
that more optimism is being seen in the market in recent months.
"In January-February there was a pervasive sense of gloom,
but that is changing," he says.
2009-2010 Forecast Highlights
That lengthy cycle has included significant drops in most areas
of construction. Following are some highlights from Murray's forecast:
- The previous resilient institutional buildings market
took a hit in 2009 as it is predicted to decrease 15 percent.
- A 25 percent decline in
construction starts is forecast for this year, which Murray
says is bigger than previously expected.
- "The commercial building market really got clobbered
this year," says Murray who adds that segment is down approximately
- Healthcare facilities have posted a 36-percent drop thus
far this year after an all time high in 2008.
- Airline terminal projects have posted a fairly large
pickup in 2009. "There are some large projects that are moving
the numbers up," says Murray.
- Multi-family housing has seen a 55 percent drop in 2009.
Murray forecasts a modest increase in 2010.
- The retail segment has taken a huge hit in 2009, according
to Murray, and another decline may come in 2010. However, he points
out that this is causing some big box retailers to "scout
out new locations."
- Murray points out that the hotel market has posted another
steep decline in 2009 and the top list of commercial hotel projects
has no Las Vegas projects on it showing just how much that market
has declined. The list now includes smaller hotel projects such
as Embassy Suites.
- The decline in construction of educational buildings
was surprising to Murray who says everything was down in this
segment except for research labs. The bright spot here is that
school enrollments are increasing so he forecasts improvement
in this market for 2010.
- "Government-related buildings are cushioning the
overall decline," adds Murray.
An Unstable Credit Market
However, while the market may be on its way up, Murray says another
huge obstacle for the industry may be looming.
"The big unknown and threat is commercial mortgages in 2010
and 2011," he says. "That could be the next financial
He says there are numerous instances of tight credit affecting large
projects such as the Echelon in Las Vegas, the World Trade Center
Towers 2 and 3 and the Chicago Spire, to name a few.
A Bright Spot--Stimulus Package
Murray says that $130 billion has been designated in the stimulus
bill for construction related spending for 2009-2011. He says not
much of the money has been spent yet but that should change in 2010.
"Our data shows the stimulus money is starting to come out,"
he says. "Money for energy-efficient upgrades really hasn't
hit construction starts yet."
He adds that the institutional buildings segment shows the most
benefit of the Stimulus Act thus far, which has included an increase
in courthouse projects. He also says public works is a guaranteed
area of growth in 2010 if the stimulus money comes through. If it
does he forecasts a 13-percent increase.
"Overall, the market is stabilizing after some very steep drops,"
says Murray. "It is a cyclical business and the non-residential
market has another year of entrenchment to go through."
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