U.S. Construction Market Remains Soft, Despite Pickup in Government Projects

May 1, 2009 12:00 PM

U.S. Construction market remains soft, despite pickup in government projects, according to the latest from McGraw-Hill Construction forecast

While construction is still in the doldrums, some signs of recovery are starting to shine through the wreckage. That was the message Robert Murray, vice president of economic affairs for McGraw-Hill Construction, New York, conveyed in his company's annual construction forecast recently. Indicating that a lift in public works construction is in line with his 2009 forecast, Murray suggests public works will help cushion the weakness he still expects for overall construction activity.

“The public works sector in March was supported by several large projects, and in a few months the upward push will become more broad-based as funding from the federal stimulus package begins to have an impact at the construction site, especially as it relates to transportation public works,” he said. “The prospects for nonresidential building in 2009 are less hopeful, given the persistently tight lending environment and further erosion on the employment front. As for housing, while the declines are likely to be less severe as 2009 proceeds, to this point the housing sector is still in the process of reaching bottom.”

The McGraw-Hill report showed a 3% drop in nonresidential building in March 2009 to an annual rate of $153.8 billion, and a 48% decline over February 2009 in the office building sector. The report said February's numbers had been helped out by the start of a $922-million headquarters for the U.S. Army in Alexandria, Va. The company's March forecast included another large government project — $260 million in renovation work at the Pentagon in Arlington, Va.

“While 2009 is shaping up as a tough year for private sector office construction, government-related office projects are seeing relatively strong activity, which should be enhanced over the coming year, given the stimulus funding directed at energy-efficiency upgrades to federal buildings,” said Murray.

Other large projects now underway across the United States include a $237-million university building in Palo Alto, Calif., and a $250-million terminal renovation project at San Francisco International Airport.

While the most recent statistics still paint a bleak picture for the current construction climate, McGraw-Hill's report on March construction activity indicates the year-to-year declines compared to 2008 were not quite as bad as they look on the surface, because the numbers for early 2008 included the start of some “exceptionally large” construction projects, such as the $7 billion Motiva refinery expansion in Port Arthur, Texas; three towers at the World Trade Center site in lower Manhattan with a combined construction start cost of $3.9 billion; and the $1.1-billion Revel Resort and Casino in Atlantic City, N.J. If these five large projects are excluded from the January-March 2008 statistics, Murray said nonresidential building for the first three months of 2009 would be down 35% from a year ago, as would total construction. Its forecast currently shows a 40% drop for total construction from the same period a year ago and a 47% decline for nonresidential construction.

This article was reprinted with permission from the May 8, 2009 edition of Electrical Marketing, a sister publication to EC&M.