Construction Market Forecast Calls for 11% Jump in 2010

Nov. 9, 2009
Gains in housing and public works will offset declines in commercial and manufacturing building

Gains in housing and public works will offset declines in commercial and manufacturing building — that was the big news coming out of McGraw-Hill Construction’s 71st annual Outlook 2010 Executive Conference held in mid-October in Washington, D.C. In its “2010 Construction Outlook,” McGraw Hill analysts forecast an increase in overall U.S. construction starts for next year. Due to improvement for housing from extremely low levels and broader expansion for public works, the level of construction starts in 2010 is expected to climb 11% to $466.2 billion, following the 25% decline predicted for 2009.

“The U.S. construction market in 2010 will be helped by growth for several sectors, following three straight years of decline that brought total construction activity down 39% from its mid-decade peak,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, addressing more than 300 construction executives and professionals at the conference. “The benefits from the stimulus act will broaden in scope, lifting not just highway construction but also environmental public works and several institutional structure types. With continued improvement expected for single family housing, after reaching bottom earlier this year, the overall level of construction activity should see moderate expansion in 2010.” Highlights of the firm’s 2010 forecast include:

  • Single-family housing for 2010 will advance 32% in dollars, corresponding to a 30% increase in the number of units to 560,000 (McGraw-Hill Construction basis).
  • Multifamily housing will improve 16% in dollars and 14% in units, after steep reductions in 2008 and 2009.
  • Commercial buildings will drop 4% in dollars, following a steep 43% drop in 2009. The weak employment picture will further depress occupancies, making it even more difficult to justify new construction.
  • Institutional buildings will begin to stabilize after losing momentum in 2009. Square footage will retreat another 2% after sliding 23% this year. The dollar amount of construction for this sector will edge up 1%, helped by a growing amount of energy-efficiency upgrades to federal buildings and continued strength for military buildings.
  • Manufacturing buildings will drop 14% in dollars and 3% in sq ft, hampered by the substantial amount of slack manufacturing capacity.
  • Public works construction is expected to rise 14%, given more wide-ranging strength across all project types.
  • Electric utility construction will slip 3%, continuing to settle back after a record high in 2008.

“The stimulus funds are meant to be just that, a stimulus, not the be-all-end-all answer to infrastructure financing,” said Frank J. Giunta, senior vice president and managing director of Hill International. “Both public and private sectors need to be innovative and rewrite the rules of project finance to address tremendous construction needs with minimal financing options.”

Find more information on the 2010 Outlook, or attend one of the regional outlook events. Murray will also present the 2010 Construction Outlook in a Web conference on December 16.

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