Nonresidential Construction to Dip Further

If nonresidential projects have helped prop up your firm's project list in recent times, it's worth noting that this segment may not sustain activity through a return in the residential market. In fact, the American Institute of Architects (AIA) released a report recently that forecasts an 11 percent decrease in nonresidential construction spending for 2009 in inflation adjusted terms. But the news isn't altogether bad, as the decline is expected to have a positive impact on overall construction costs.

"The downturn in nonresidential activity has helped stabilize construction costs," explains AIA chief economist, Kermit Baker, PhD, Hon. AIA. "For example, prices for steel, gypsum products, lumber and cement have all come down recently which makes taking on projects more attractive to developers."

AIA's semi-annual Consensus Construction Forecast, a survey of the nation's leading construction forecasters, indicates the hotel sector will suffer the biggest hit in 2009, with an expected 20.2 percent decrease. The retail segment is expected to produce similar results, forecasted at a 19.2 percent drop. Office buildings and industrial facilities are expected to decrease 17.5- and 11.2-percent, respectively.

"As profits for businesses have fallen and the ability to get credit to finance projects has become far more difficult, construction plans have been put on hold or canceled outright in recent months," Baker says. He warns that the AIA isn't expecting a change in this pattern for the near future. "This is not expected to turn around anytime soon and it's likely to get worse before it gets better," he adds.

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