COMMERCIAL CONSTRUCTION IN 2012 – BOOM OR BUST?

COMMERCIAL CONSTRUCTION IN 2012 - BOOM OR BUST?

The New Year is almost upon us and your company made it through 2011.

Next question: What does 2012 look like?

Most contractors and builders are not economists.  Many contractors and builders rely on the information and forecasting provided by chief financial officers and professional financial advisors.  But many contractors and builders are not in a position to hire professional subject matter experts and try their best to sort things out on their own.  However, all contractors and builders ultimately must make their own decisions based on the information available to them.

Certainly there is plenty of forecasting information out there.  The news media, Internet, and social media bombard us with statistics as well as interpretation of those statistics – which often conflict with each other.

Industry Expert 2012 Forecasts


For instance, the 2012 Dodge Construction Outlook was released by McGraw-Hill Construction in October 2011.  McGraw-Hill is a longstanding and respected resource in the construction sector within the areas of business planning and industry forecasting.  Their take on 2012?  Construction starts for 2012 will effectively be flat – with some improvement seen in various market sectors.  One of those sectors expected to see improvement is commercial construction which is predicted to grow by as much as 8% – with warehouses and hotels seeing the most growth, whereas growth within offices and stores will see only moderate improvement.  Reed Construction Data, a prominent resource to the construction industry, reports a forecast of 5% growth in 2012 with this growth increasing to 8.5% in 2013.

On the other hand, when looked at from the perspective of commercial real estate data, the forecasts provide different insights into 2012.  Price-Waterhouse-Coopers and the Urban Land Institute released the Emerging Trends in Real Estate 2012 Survey, a respected forecasting resource. Surveyed were 950 top U.S. real estate executives, including investors, developers, property managers, consultants, lenders, and brokers.

The Emerging Trends 2012 survey respondents indicate that, while there are a few promising markets, in general almost 3 years after our nation’s economic debacle the continued lack of growth in the numbers of jobs, along with a trend for tenants to make do with less space translates into sluggish growth.  Companies are tightening their belts and living on less, not more space.  The survey respondents predict that the number of commercial properties for sale will increase, while the number of buyers will decrease.  The report recommendations include advising developers and investors to concentrate on markets that generate jobs – most specifically within the technology and energy industry sectors.  Additionally, the survey indicates that growth can be expected within multi-family investment and development due to the inability (or reluctance) to purchase homes in the current economic environment.

Predicted Sectors for Growth

Certainly these forecasts do not present optimistic predictions as to a growing market for commercial construction in 2012.  Especially when taking into consideration that most respected resources for commercial construction data report an approximate decline in commercial construction in 2011 between 4 and 4.5%

On the other hand, and more important to contractors and builders, these repots do provide insights into markets where commercial construction contractors may want to concentrate when prospecting for business in 2012.  While national statistics certainly are important – more important to contractors and builders is their own 2012 bottom line statistics.

According to the forecasts and surveys above, here are markets and projects contractors and builders may want to investigate further when prospecting for business:

  • Warehouses
  • Hotels/Motels
  • Multi-family residential
  • Commercial Deferred Maintenance
  • Job growth centers, especially within technology and energy industry sectors

Useful links regarding forecasting 2012 commercial construction:

http://www.multivu.com/mnr/52705-mcgraw-hill-construction-2012-dodge-outlook-report

http://www.uli.org/News/PressReleases/Archives/2011/2011PressReleases/EmergingTrendsUS.aspx

http://www.archdaily.com/156527/aia-consensus-construction-forecast-predicts-continued-decline-followed-by-modest-recovery/

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