Construction Starts Down 15 Percent to $463.1 Billion in ’09, McGraw Hill Predicts

McGraw-Hill Construction last week estimated new construction starts for 2009 at $463.1 billion as part of its 2009 Construction Outlook Spring Update, providing updated 2009 forecasts of construction starts for various project types. The forecast is down 15 percent, but cushioned by support provided by the recently enacted stimulus legislation, the American Recovery and Reinvestment Act of 2009.

Other major findings include:
· Public works will realize the most immediate benefit from its stimulus act, with construction starts climbing 10 percent, including a 15-percent rise for highways and bridges. Without the stimulus funding, the report estimates that public works in 2009 would have fallen 10 percent, restrained by the deteriorating fiscal health of state and local governments.

· Institution building in 2009 will drop 6 percent as the weak financial environment takes its toll on educational and healthcare facilities. The stimulus funding will provide a lift to military facilities and energy upgrades for federal buildings, which will moderate this year’s overall institutional decline.

· Commercial building in 2009 will drop 27 percent, steeper than the 17 percent slide reported last year. The tight lending environment has made it extremely difficult to obtain project financing, leading to more projects being deferred or cancelled. All commercial project types will register declines in 2009, with the most severe retrenchment anticipated for hotel construction.

· Residential building in 2009 will drop an additional 31 percent, continuing the downward trend since 2006. Similar declines are expected for single-family housing (down 30 percent) and multifamily housing (31 percent). Steps taken in early 2009 to address the foreclosure problem should help to ease the rate of descent for housing as 2009 progresses.

“The construction industry is facing divergent forces in 2009,” said Robert Murray, vice president of economic affairs, McGraw-Hill Construction. “The economy has weakened substantially, and despite all the efforts last fall directed at thawing frozen credit markets, there is yet to be any sign that lending conditions for construction have improved. On the plus side, the federal stimulus bill is now in place, which will provide quick support to public works this year.”