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With uncertainty continuing to hang over the U.S. economy and construction industry, Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, offered some good news and some bad news in his address at the Outlook 2012 Executive Conference in Washington, D.C.
“The corner is being turned, but it’s being turned ever so slightly in a very hesitant and uneven manner,” he said.
Without the economy coming back, the building industry won’t either.
Congressional decisions on spending cuts and the resulting availability of public funds could largely impact construction, he indicated.
In addition, private financing, which has shown mixed signals, will be essential to a return in commercial projects.
Overall, nonresidential building was down 6% in 2011 and is expected to increase a slight 2% in 2012.
Some nonresidential construction sectors, on a square footage basis, grew in 2011 and are projected to grow in 2012, with increases of 17% expected for warehouses and hotels, and manufacturing buildings looking at a 6% expansion.
The positive outlook for warehouse construction may be a sign of changing trends in retail purchases.
Murray said that warehouse construction is “getting away from its prior relationship of following stores and actually perhaps leading the path that we would be expecting from stores.” Internet retailer Amazon.com built three new warehouses just this year.
Institutional types of buildings reliant on public funding will fare much worse this year due to fiscal tightening at the local, state and federal levels.
Trending gradually downward since 2008, educational and public building construction will drop 9% next year.
Airports, which climbed in 2009 and subsequently lost altitude, are expected to head 5% lower next year.
A sector that hasn’t felt the downturn as sharply as others, health care facility projects will hold relatively steady next year — losing 0.1%. Uncertainty over health care reform may be one factor delaying its quick recovery.
Other sectors expected to improve just slightly from exceedingly low levels are stores (up 2%) and offices (up 4%).
Office construction relies heavily on job growth, which has been occurring at a snail’s pace.
Megastores like Wal-Mart are downsizing to smaller stores better suited to breaking into urban markets, while Best Buy in Texas has started subleasing space in its stores to other retailers to keep up its revenue.
Amusement and recreation projects are not expected to change in 2012 after gradually declining since 2008. However, changes in casino legislation could contribute to more amusement-related projects in the coming years, according to Murray.
To view a video of Murray’s presentation, including projections for residential and nonbuilding construction, click here.