advanced search

Mortgage Fallout

Dec 1, 2007 12:00 PM, By Beck Ireland, Staff Writer

According to Murray, warehouses are the one non-residential sector that's getting bigger. There's greater demand for warehouses from global trade. In addition, larger regional facilities are being built by major retailers, and there's a need for updated facilities to handle improved inventory management practices.

The decline in residential growth has also played an important part in the loss of interest in public projects associated with residential areas, particularly water and sewers, as well as private projects that derived demand from the housing market.

Amid questions about the solvency of the highway trust fund and the federal highway bill, Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the U.S. Chamber of Commerce recently reported that the funding shortfall will reach $1 trillion by 2015. Although some states are trying to make up for this with tolls and private funding, others have experienced legislative disapproval. For example, Texas recently passed legislature to impose a moratorium on private equity for two years.

Although the collapse of the I-35 bridge in Minneapolis in August called attention to the run-down state of the nation's infrastructure, many industry experts say the limelight was short lived. “It was an issue that was brought to the forefront, and it quickly dissipated,” Sullivan says. “I have absolutely no extra spending on bridges integrated into the report.”

Although PCA is predicting a 2.1% increase in the value of construction put-in-place for public construction, Sullivan has reservations. “You could get the re-emergence of fiscal pressure in 2009,” he says. “Slowdown in job creation means a state revenue slowdown and state fiscal crisis.”

The biggest differences in forecasts for the 2008 construction economy lie in how industry experts treat the sub-prime mortgage crisis. Some believe the damage to be largely over and confined to the single-family housing market. Others argue that the tighter lending standards brought on by the mortgage crisis will spill over into the non-residential sector. “I have it touching everything,” Sullivan says.

However, even with this major difference of opinion, most projections are predicting a bottoming-out of the residential sector, with a possible recovery by 2009 or 2010. For the non-residential markets, there is slow growth ahead, especially for sectors intrinsically linked to the residential market, such as retail and public projects, especially water and sewer, yet market fundamentals for the non-residential sector remain strong.

The 2008 forecasts allocate the chance of recession between 30% and 45%, yet they all depend upon the economy avoiding a recession, which is the one factor that could cause major corrections to this year's forecasts. Consumer confidence, the price of oil, interest rates, the value of the dollar, and employment and wage rates will all play a part as 2008 unfolds. “There's certainly a lot of uncertainty going around,” Murray says.

Sidebar: A Green Future

By 2010, green buildings are expected to comprise 5% to 10% of U.S. non-residential buildings. Currently, new federal energy legislation with green building provisions is making its way through Congress. The provisions would require new federal buildings to decrease consumption of fossil fuels in stages, with the goal of achieving “carbon neutrality” by 2030. The version of the bill currently in the House would also require private utilities to provide at least 15% of their electricity from renewable sources, such as wind and solar, by 2020.

“We are in the midst of one of the biggest societal shifts since World War II,” says Rick Fedrizzi, president, CEO, and founding chairman, U.S. Green Building Council (USGBC), Washington, D.C. “Then, everyone came together at that one moment. I think we're there today, realizing the energy crisis and the health crisis are all environmentally linked. The green movement addresses this.”

In 2006, it's estimated that 2% of the non-residential buildings in the United States were certified under USGBC's Leadership in Energy and Environmental Design (LEED) credentials. According to the USGBC, there are LEED-certified buildings in at least 25 states and 100 cities in the nation. Currently, USGBC has 11,185 corporate members and 40,471 LEED-accredited professionals. “LEED taught people a language,” Fedrizzi says. “People want this basic knowledge about the boxes we live, work, and play in.”

This could mean a double behavior change for the construction industry. With “green” catching on around the country, the pressure is on to change what it builds as well as how it builds. The building sector is the single largest contributor to carbon dioxide emissions. To make matters worse, the construction industry is No. 1 for landfills. “We know what buildings use: energy, water, waste, CO2,” Fedrizzi says. “But we also know the effect of green buildings, which is 40% less CO2. If you can buy a $1.39 box of animal crackers that can tell you the amount of fat and calories, why can't you do that with a $90-million building?”

Driving green building are the manufacturers that collaborate on technology to associate activity with energy consumption and cost, says Fedrizzi. “There is a collective consciousness equating green with safety and controls.”

This allows owners and developers to look at buildings in a holistic sense. “A $4-per-square-foot investment in building green could net a $58-per-square-foot benefit over 20 years,” Fedrizzi says. “This is immediate and measurable.”

This also gives the private sector the incentives it needs, instead of mandates that direct energy efficiency.

Want to use this article? Click here for options!

© 2012 Penton Business Media, Inc.

---

Acceptable Use Policy blog comments powered by Disqus

Browse Back Issues Select an Issue EC&M Magazine | April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 1, 2009 December 2008 November 2008 October 1, 2008 September 2008 August 2008 July 2008 June 1, 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 1, 2006 May 1, 2006 April 2006 March 1, 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004 March 2004 February 1, 2004 January 1, 2004 December 1, 2003 November 1, 2003 October 1, 2003 September 1, 2003 August 1, 2003 July 1, 2003 June 1, 2003 May 1, 2003 April 1, 2003 March 1, 2003 February 1, 2003 January 1, 2003 December 1, 2002 November 1, 2002 October 1, 2002 September 1, 2002 August 1, 2002 July 1, 2002 June 1, 2002 May 1, 2002 April 1, 2002 March 1, 2002 February 1, 2002 January 1, 2002 December 1, 2001 November 1, 2001 October 1, 2001 September 1, 2001 August 1, 2001 July 1, 2001 June 1, 2001 May 1, 2001 April 1, 2001 March 1, 2001 February 1, 2001 February 1, 1995 January 1, 2001 December 1, 2000 November 1, 2000 October 1, 2000 September 1, 2000 August 1, 2000 July 1, 2000 June 1, 2000 May 1, 2000 April 1, 2000 March 1, 2000 February 1, 2000 January 1, 2000 December 1, 1999 November 1, 1999 October 1, 1999 September 1, 1999 August 1, 1999 July 1, 1999 June 1, 1999 May 1, 1999 April 1, 1999 March 1, 1999 February 1, 1999 January 1, 1999 December 1, 1998 November 1, 1998 October 1, 1998 September 1, 1998 August 1, 1998 July 1, 1998 June 1, 1998 May 1, 1998 April 1, 1998 March 1, 1998 February 1, 1998 January 1, 1998 December 1, 1997 November 1, 1997 December 1, 1996 November 1, 1996 October 1, 1996 September 1, 1996 August 1, 1996 July 1, 1996 June 1, 1996 May 1, 1996 April 1, 1996 March 1, 1996 February 1, 1996 January 1, 1996 December 1, 1995 November 30, 1995 November 1, 1995 October 1, 1995 September 1, 1995 August 1, 1995 July 1, 1995 June 1, 1995 May 1, 1995 April 1, 1995 March 1, 1995

browse e-newsletters