Originally published in Interiors & Sources

07/01/2003

AIA Looks to Construction Recovery in 2004

 
NOTEWORTHY


AIA Looks to Construction Recovery in 2004
by AIA chief economist Kermit Baker, Ph.D., Hon. AIA

Regarding the outlook for nonresidential construction activity, as with most situations, there's some good news and some bad news. The bad news is that the recovery is taking longer to materialize than most expected. The consensus is that nonresidential construction will be down about five percent this year, the fourth straight year of decline in nonresidential contracts. Cumulatively, the decline over this period is likely to total almost 25 percent.

The good news is that there is a firm consensus that the situation will improve next year. Overall, the AIA Consensus Construction Forecast Panel is projecting an average increase of over four percent in nonresidential construction, with a six percent gain in commercial activity and a 15 percent increase in the decimated industrial construction market.

Given trends in the overall economy, it should be no surprise that the nonresidential recovery has been slow to materialize. Real growth in three of the past five quarters has been below two percent at an annualized rate. Job growth likewise has been anemic. There was a net loss of more than one half million payroll positions since the beginning of 2002. About 80,000 of these net losses have come from the construction industry.

Still, there are some signs of optimism emerging from the economy. Consumer confidence numbers have bounced back sharply in April and May and now are at levels comparable to those before the economy headed into recession in early 2001. Residential construction continues to benefit from low mortgage rates. Housing starts in 2002 were at their highest level of a decade and a half, and construction levels this year are at that same pace. Strong housing numbers generally prelude emerging strength in nonresidential activity. Falling oil prices, the lowest interest rates in two generations and a recovering stock market all point to better economic conditions in the months ahead.

Additional highlights of the AIA Consensus Forecast include:

  • The panel is optimistic about the outlook for commercial and industrial construction in 2004. Overall growth is projected at six percent for commercial buildings and 15 percent for manufacturing facilities. Gains in office and hotel construction are projected to pace the recovery in commercial activity.

  • Office vacancy rates are expected to peak in early 2004, according to Colliers International. Vacant sublease space already is dropping in many markets. Construction levels have been declining, which means less space will be added to the market in the coming quarters. As conditions stabilize early next year, a new round of construction is expected to get under way.

  • The rebound in retail construction is expected to be more modest because the falloff was less severe. The strong housing market in recent years has fueled retail activity, and home refinancing helped keep consumer spending strong. Though spending on hotel construction has dipped significantly in recent years, contract awards are projected to increase modestly this year, pointing to fairly significant construction gains next year.

  • Education construction has not only been a growth engine for the entire institutional sector over the past decade, it also has single-handedly helped mute the downturn in the commercial/institutional sector in recent years. Between 1990 and 2001, contract awards for education facilities increased more than 90 percent after adjusting for inflation due to growth in the school-age population and strong financial position of local governments.

    Contract awards for educational buildings dipped last year, and look to dip again this year. Projects in the pipeline, however, look to be sufficient to keep spending levels rising this year. Our forecast panel is projecting a modest decline in education construction activity next year.

    To read the full AIA Consensus Construction Forecast, visit: www.aia.org/ecomark/tw0606/0606ker mit_consensus.htm.

    Men vs. Women:
    What's Important?

    Men put big desks first and women put big desks last when it comes to what they believe is most prestigious in office
    furniture, according to a new survey sponsored by The HON Co., Muscatine, IA. In fact, according to the survey, men and women
    disagree on almost everything when it comes to what office furniture is most prestigious. The only thing they did agree on is the prestige of a comfortable, adjustable chair. For office furniture, this is the order of most prestigious to least:

    Men Women
    1. Big desk
    2. Comfortable, adjustable chair
    3. Matching office furniture
    4. New office furniture
    1. Matching office furniture
    2. Comfortable, adjustable chair
    3. New office furniture
    4. Big desk

    "Our offices say a lot about us, and it's clear that for men and women, what matters is not the same," said Dave Burdakin, president of HON. "These results also substantiate a trend we've seen—that both men and women want to be able to customize their own office environments."

     



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    Visit our website today to learn about the design flexibility of a Morton building and the endless possibilities of partnering with our designBUILD team.


    Wood construction is both cost and energy efficient. Check out Morton Buildings and our designBUILD team online today to discover all the benefits of post-frame construction.


    When choosing a metal-clad building for your next construction project, consider Morton Buildings, Inc., and their designBUILD team, we’ll make your dream a reality.

    Yaskawa drives offer quality performance for air handlers and cooling towers on the roof to secondary chilled water pumps in the basement

    Bluebeam® Revu® simplifies digital facilities document management from design review to leveraging as-builts, maintenance manuals and O&Ms submittals.

    We Can Help You Reduce Energy by 30%

    Our mission is to help our customers manage their buildings' energy costs, improve reliability, and enhance performance while having a positive impact on the environment.
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