Non-Residential Construction Projects in Jeopardy

Nov 12, 2008 5:09 PM

The credit market meltdown and crumbling economy have caught up to the non-residential construction market, says Ken Simonson, chief economist, Associated General Contractors of America, Arlington, Va. "Non-residential construction is on the verge of a potentially long slide," Simonson warns. His comments followed reports from the Census Bureau on construction spending in September and the National Association for Business Ecnomics (NABE) on third-quarter and expected activity.

According to the Census figures, although non-residential spending showed a gain of 0.1%, private non-residential spending was down almost 1% from its high-water mark in June, and public spending fell 1.3% in September alone. The NABE survey found that companies on balance plan to decrease spending on structures in the next 12 months.

In addition, portfolio losses for endowments and donors have put a dent in construction among institutions. Brown, Boston, and Cornell Universities, Massachusetts Institute of Technology, and Williams College have put on hold or canceled construction plans.

In addition, a recent article from Crain's Detroit Business reported temporarily shelved plans for the expansion of Saint Joseph Mercy Saline Hospital as well as new construction for another hospital in Livingston County because of poor economic conditions in Michigan.

"Contractors have been reporting that developers put lots of projects on hold because of the credit freeze and weakening demand for stores, offices, and other facilities," Simon says. "Meanwhile, states had to postpone construction bond issues or defer budgeted projects in order to meet balanced-budget mandates."