Construction Market Expected to Drop 4% in 2010 after 13% Decline in 2009

Feb. 1, 2010
FMI survey predicts downfall of non-residential construction market has only just begun

While 2009 was likely the bottom for the construction industry in terms of percent decline, 2010 will likely be the bottom in terms of dollar volume. This was the key message coming out of the recent “Construction Outlook: Fourth Quarter 2009 Report” from Raleigh, N.C.-based FMI, management consultants/investment bankers for the construction industry.

Although residential construction is expected to begin recovering in 2010 — and the overall economy may show some signs of improvement — the beginning of the downfall for non-residential construction has only just begun, a segment that's expected to drop 15% in 2010 after already declining 10% in 2009 (click here to see Figure). Following are some highlights from the report.

  • Lodging construction has gone through several cycles of overbuilding and corrections, which began in 2004 and will end this year. After three years of high growth, lodging peaked at $35.8 billion in 2008. According to FMI analysts, this segment will see at least two years of large declines.

  • Because office construction is highly dependent on employment, it will take several years until there is enough employment growth to spur new construction. As a result, office construction will fall from its 2008 high of $70.3 billion to $40 billion at its low in 2011.

  • Commercial construction relies heavily on consumer spending and new housing construction. Consumer spending will not bounce back until the employment situation improves. Commercial construction will follow a turnaround in the housing market by 12 to 18 months; however, it is not expected to pick up until 2012.

  • Health-care construction will likely see a small increase in 2010 and 2011, keeping this segment at a historically high level. Hospital construction will allow the segment to maintain its volume, and special care construction will help to drive future growth.

  • Educational construction is expected to see a small dip in 2009 and 2010. State revenues are down, which impacts K-12 construction, and the stock market is down, which impacts endowments and spending at universities.

  • Religious construction is extremely sensitive to the economic environment. During an economic downturn, religious construction is usually the first segment to produce a decline. FMI analysts expect religious construction to pick up when consumer spending improves.

  • Public safety construction is one of the few non-residential segments that is not expected to decline. Although jail and detention center construction is down, growth is coming from federal funding for military structures.

  • Amusement and recreation construction is expected to decline as casino projects are delayed and canceled, sports stadiums are completed, and a spate of convention centers are finished.

  • After a flat 2009, transportation construction is expected to recover in 2010, due mostly to rail and airport construction. This market is expected to double between 1999 and 2013.

  • Manufacturing construction has experienced six years of strong growth, almost doubling the size of the market. This segment is expected to decline in 2010 and 2011, but will remain at an elevated level. The growth has come from billion-dollar refinery projects, materials, and electronic manufacturing.

  • Power construction has seen four years of phenomenal growth, expanding from $35.5 billion in 2005 to $88.2 billion in 2009. It is expected to remain positive for the next five years, reaching new highs each year until it hits a projected $124.4 billion in 2013.

  • Highway/street construction is facing a tough climate with declining state revenues. Funding from the American Recovery and Reinvestment Act is enough to offset these losses, although paving projects are mostly being funded.

  • Sewage and waste disposal construction will remain at a historically high level. The market has more than doubled in size over the last decade from $10.1 billion in 1999 to $25.4 billion in 2009. Slow, steady growth will push the market to reach $31.8 billion in 2013.

  • Water supply construction, which grew from $7.6 billion in 1999 to $17.1 billion in 2009, is expected to remain flat for the next two years but grow to $20.2 billion in 2013.

Voice your opinion!

To join the conversation, and become an exclusive member of EC&M, create an account today!

Sponsored Recommendations

Electrical Conduit Comparison Chart

CHAMPION FIBERGLASS electrical conduit is a lightweight, durable option that provides lasting savings when compared to other materials. Compare electrical conduit types including...

Don't Let Burn-Through Threaten Another Data Center or Utility Project

Get the No Burn-Through Elbow eGuide to learn many reasons why Champion Fiberglass elbows will enhance your data center and utility projects today.

Considerations for Direct Burial Conduit

Installation type plays a key role in the type of conduit selected for electrical systems in industrial construction projects. Above ground, below ground, direct buried, encased...

How to Calculate Labor Costs

Most important to accurately estimating labor costs is knowing the approximate hours required for project completion. Learn how to calculate electrical labor cost.