Steep Decline For Nonresidential Construction Activity Anticipated In 2009
Decline Construction 2009According to forcasts by the American Institute of Architects, nonresidential construction spending when adjusted for inflation, is projected to decline by 11 percent in 2009.

Office buildings, hotels, and retail establishments are poised to see the largest declines in spending. Hotels are forcasted to decline (-20.2 percent), retail (-19.2 percent) and office buildings (-17.5 percent) in 2009.

 

According to AIA Chief Economist, Kermit Baker “As profits for businesses have fallen and the ability to get credit to finance projects has become far more difficult, construction plans have been put on hold or canceled outright in recent months”. He adds that the situation is not expected to turn around anytime soon and is likely to get worse before it gets better.

The decline is expected to slow somewhat in 2010, with retail seeing the most significant recovery (-6.6 percent in 2010 vs. -19.2 percent in 2009). One silver lining in the midst of the negative data, has been a drop in prices for key construction commodities. Adds Baker,“The downturn in nonresidential activity has helped stabilize construction costs. For example, prices for steel, gypsum products, lumber and cement have all come down recently which makes taking on projects more attractive to developers.”

The Institutional sector is also expected to see a drop in construction spending activity in 2009, however at a more modest level. Religious facilities (-9.4 percent) and Educational facilities (-7.4 percent) will be the most affected, while Health Care facilites should see only a modest decline (-3.6 percent). Religious and Amusement / Recreation facilties are expected to see marginally positive growth in 2010 (1.4 percent) and (1.0 percent) respectively, while Education and Health Care should experience a more modest decline in 2010 relative to 2009 (-1.9 percent vs. -7.4 and -3.6 respectively).

The AIA Consensus Construction Forecast Panel, whose purpose is to project business conditions in the construction industry over the next 12 to 18 months, is conducted twice a year with research data from McGraw Hill Construction, Global Insight, Moody’s Economy.com, Reed Business Information, and FMI.
 



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