Forecast 2002 - Setting the Stage

Jan. 9, 2002
Construction/modernization activity resumes in 2002 - Part 1 of 3
Compiled by Linda K. MonroeOur [industry] creates places for people to work safely, to conduct business, to make friendships. Our creations become more than buildings – they are visions of our success, homes for countless businesses, and symbols of our culture. Many a civilization is built on the foundations of our forebears. To build on such foundations is to rise again with new vision and strength of purpose.  Our ability to create built symbols for our culture where we live, learn, and work – rejoice and reflect – must continue as our highest mission. — Boston Society of Architects, following the events of Sept. 11, 2001Continued strength in the modernization/upgrade market will balance slackening new construction spending, according to Buildings’ annual forecast, now in its 40th year. What’s unusual about this current economic slowdown is the relative health of the commercial building economy. In the past, economic downturns were usually accompanied by high vacancy and interest rates. This time, the commercial market is in reasonable shape on the supply/demand side, and interest rates are quite low by historic standards.While the economy was close to recession prior to the terrorist attacks on September 11, the impact of such events deepened and lengthened the economic slowdown – compounded by a weak job market and diminished confidence levels. As 2002 proceeds, however, it is expected that the pace of economic expansion will pick up, with the value of new construction starts in 2002, according to F.W. Dodge Construction Outlook 2002, staying close to 2001’s estimated $481 billion (which includes single-family housing, public works, electric utilities, income properties, institutional buildings, and manufacturing buildings). Of this number, Buildings’ subscribers – 57,000-plus professionals – will spend approximately $112 billion on their new construction projects in commercial/institutional buildings; another $151 billion will be devoted to commercial/institutional building modernization and upgrades.According to Buildings’ 2002 Forecast of its subscribers, the education market continues to be the star performer, with an impressive 10-percent increase in new project spending. Both office and retail will be lower, with declines of 14 and 8 percent, respectively. Slower employment growth and cutbacks in the tech industries have impacted commercial construction, and this market will need an improving economy to rebound.As in past economic slowdowns, modernization seems to thrive when new construction activity slackens. Therefore, it’s no surprise that the numbers for modernization – renovation, rehabilitation, historic preservation, adaptive reuse, etc. – will continue to grow in 2002. Almost all building types are up, led by the office market with estimated spending of almost $46 billion. Factors driving this modernization boom include continued high churn rates in many corporate and institutional facilities, infrastructure improvements, technology, changes in building use, and other related issues.Total project spending in 2002 for Buildings’ subscribers is estimated at $262.64 billion, compared to expenditures in 2001 of $261.37 billion [see Total Project Spending 2002 Among Buildings’ Subscribers, page 37, for a breakout by building type. Reports are available by contacting Robin Melichar, marketing supervisor, at (319) 364-6167].Total Project Spending 2002 Among Buildings' Subscribers Estimated Spending 2002Comparative Expenditures 2001Office$72,754,000,000$75,531,000,000Retail$57,811,000,000$58,386,000,000Hotel/Motel$12,674,000,000$13,001,000,000Education$48,319,000,000$44,540,000,000 Healthcare$13,292,000,000$13,405,000,000Apartment/Condo$17,983,000,000$17,172,000,000Government$18,271,000,000$17,553,000,000Other Commercial$21,534,000,000$21,786,000,000Total$262,638,000,000$261,374,000,000SOURCE: BUILDINGS' 2002 FORECASTGo to part 2 - On the Rise Linda K. Monroe ([email protected]) is editorial director at Buildings magazine.

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