Nonresidential Building to Remain Flat in 2007

By Megan Headley

The expectation is that "nonresidential building this year for the United States will be flat," according to Robert Murray, vice president of economic affairs for McGraw-Hill Construction. Murray presented a 2007 Outlook for U.S. Construction Activity webcast yesterday afternoon.

"It is still a pretty good year for nonresidential building," Murray said. "When you get to 2008 this might change a bit."

Murray predicted "modest percentage declines" for nonresidential construction into 2009, while hoping that a slight increase in single-family housing construction will offset a decline in nonresidential construction, balancing overall construction activity.

The webcast also addressed the increasing costs of materials.

"The cost of materials has been a major issue from 2004 to the present," Murray said.

Among the rising costs, Murray noted that heightened global demand of steel and iron, particularly in China, has contributed to continuing increases in the prices of those products.

"It would seem that iron and steel is once again becoming an issue the building industry has to deal with," Murray said.

However, the cost of glass products, according to Murray, will remain flat.

With respect to individual areas of nonresidential construction, Murray predicted that the construction of income properties-including commercial buildings and multifamily housing-is expected to see a 5-percent decline in 2007, but it's a decline that follows big increases in the last two years.

Murray said that hotel construction remained the star of the show in 2006, and remains fairly strong this year as well. However, a 4-percent decrease in construction in 2007 might indicate "a pullback in lodging-related construction in 2008 and 2009," he said.

He noted that casino hotel growth stands out-with the top three projects in terms of square feet located in Las Vegas-as well as growth in convention center hotels and condominium hotels.

"Broadening of the construction activity across the lodging spectrum which will keep the overall activity pretty high," Murray said.

Murray also expects a "gradual upturn" in the construction of office buildings in 2007.

"The expectation is for another year of expansion getting up to 210 million square feet," he said. That marks a 4-percent increase over 2006.

Murray also noted that 2006 saw an all-time high in terms of healthcare building construction-110 million square feet. "We do see a mild pullback taking place in 2007," he said.He predicted a 2-percent decrease to 107 million square feet.

One big trend Murray spotlighted during the webcast was toward green building-which, according to a recent survey conducted by McGraw Hill, is hardly a trend anymore. The survey of 190 corporations found "growing acceptance and a growing tendency to engage in green activities and green building strategies." Murray predicts a market shift in the next three years toward more green projects.

"By 2009, 80 percent of corporate America is expected to be engaged in green at least 15 percent of the time," Murray said.

Twenty percent of corporations are expected to be engaged in green practices 60 percent of the time. Forty-three percent of the survey respondents said that green activities and green building are part of their firms' growth strategies.

With relation to glass, Murray said that the Energy Policy Act of 2005 is one of a few major legislative actions that has spurred on construction work. The act offers tax credits for, among other things, energy-efficient windows and doors and film.

Murray also noted that a federal executive order in January set energy and environmental goals for federal agencies, including an energy reduction of 3 percent per year through 2015 or 30 percent by 2015.

"There's been a lot more emphasis placed on green building practices," Murray said.

Megan Headley is assistant editor for USGNN.com™/USGlass magazine.