2009 construction forecast

McGraw-Hill Construction, part of The McGraw-Hill Companies released its 2009 Construction Outlook, which forecasts a drop in overall U.S. construction starts for next year, as the tough funding environment continues, construction projects are deferred, and financial stress gradually eases. Against this backdrop, the level of construction starts in 2009 is expected to decline 7 percent, to $515 billion, following a 12 percent decline predicted for 2008.

“The speed and scope of the events in September and October were startling,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, addressing 400 construction executives and professionals at the Outlook 2009 Executive Conference in Washington. “Tighter lending standards are a major constraint for the construction industry. For single family housing, declines are continuing and showing no sign of an upturn. Home prices are continuing to drop, a 20 percent drop so far this year, and we expect another 10 percent decline through the first half of 2009. Then, things should level off. Store construction has taken the biggest hit; we’re looking at a 30 percent decline in retail square footage starts this year.”

Highlights of the 2009 Construction Outlook include:

* Single family housing for 2009 will be down 2 percent in dollars, corresponding to a 4 percent drop in the number of units to 560,000 (McGraw-Hill Construction basis).

* Multifamily housing will retreat 6 percent in dollars and 8 percent in units, after the sharp plunge witnessed during 2008.

* Commercial buildings will drop 12 percent in dollars and 15 percent in sq. ft., similar to the declines experienced in 2008. Stores and warehouses will continue to lose momentum, the office correction will be steeper, and hotel construction will finally pull back after its lengthy boom.

* Institutional buildings will slip 3 percent in dollars and 6 percent in sq. ft., as the financial crisis affects funding coming from states and localities.

* Manufacturing buildings will plunge 32 percent in dollars after an exceptional 2008 that was lifted by the start of several massive oil refinery expansion projects.

* Public works construction will fall 5 percent, given flat funding at the federal level combined with restraint by state and local governments.

* Electric utility construction will retreat 30 percent after surging 55 percent to a near record amount in 2008.