Murray
Predicts Scaling Back for 2008 Commercial Construction Outlook
This year marks the first decline in construction starts since
1991, according to the Department of Commerce, said Robert Murray,
vice president of economic affairs for McGraw-Hill, during McGraw-Hill
Construction's Outlook 2008 Executive Conference yesterday in Washington,
D.C. Murray presented the 2008 outlook for U.S. construction activity.
Overall, Murray is predicting commercial building construction
starts to drop to $91.1 billion from a total of $97.3 billion in
2007.
"The credit crunch that emerged at mid-2007 continues to be a major
concern for construction and the overall economy," said Murray.
"As a result, we're now predicting downturns in the previously resilient
multifamily and commercial segments, as well as continued weakness
in single-family home construction."
The 6 percent drop in commercial building dollar volume corresponds
to an 11 percent slip in square feet. Tighter lending standards
and the slower absorption of space are expected to contribute to
a measured downturn for stores, warehouses, offices and hotels.
Murray predicted a bigger drop in store construction than has occurred
recently, down 10 percent in 2008 to 270 msf. Wal-Mart, one of the
major players in retail construction, has announced plans to scale
back expansion, and that sentiment seems to be echoed by big box
retailers Home Depot and Lowe's. There is also a continuing shift
to smaller venues, known as "lifestyle centers."
After a pause in 2005 where projects were reassessed due to higher
costs, office construction strengthened once again. However, for
2008 Murray is predicting an 8-percent drop in the millions of square
feet (msf) constructed, from 215 msf in 2007 to 197 msf.
While hotel construction soared in 2006, 2007 showed a leveling
off. 2006 and 2007 showed broad expansion, with numerous projects
in Las Vegas and a number of convention center and "condo" hotels.
The hotel sector is expected to be pulling back on expansions in
2008, as revenues per available room are showing slower rates of
growth.
2008 is expected to see a 4-percent increase in the dollar volume
of educational building construction, and a 1-percent increase in
square footage. Numerous states, most notably California, have passed
school construction bond measures in recent years. Major universities
have increased their capital spending plans, keeping college and
university construction on an upward track.
While construction of healthcare facilities reached a new high
in 2006, that market is now settling back. 2006 saw 109 msf built
in the healthcare arena, while 2007 saw an 8-percent drop to 100
msf; that downward trend is expected to continue with a 4-percent
drop in 2008 to 98 msf.
U.S. Total Construction Starts for 2008
In billions of dollars
|
2004
|
2005
|
2006
|
2007
|
2008
|
Total Construction |
593.0
|
668.9
|
682.5
|
626.7
|
614.1
|
Single Family Housing |
282.7
|
315.5
|
272.4
|
204.0
|
197.8
|
Multifamily Housing |
50.4
|
68.3
|
69.6
|
61.4
|
56.4
|
Commercial Buildings |
67.2
|
72.0
|
91.4
|
97.3
|
91.1
|
Institutional Buildings |
89.1
|
99.7
|
109.8
|
114.0
|
118.7
|
Manufacturing Buildings |
8.0
|
10.0
|
13.3
|
18.6
|
16.5
|
Public Works |
88.2
|
95.8
|
112.2
|
117.9
|
121.0
|
Electric Utilities |
7.3
|
7.8
|
13.8
|
13.4
|
12.7
|
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