Commercial Construction Spending Not Expected Until Late 2011

Commercial Construction Spending Not Expected Until Late 2011

Commercial News » Commercial Real Estate Edition | By Michael Gerrity | January 26, 2011 10:50 AM ET

According to the American Institute of Architects' (AIA) semi-annual Consensus Construction Forecast, a slow recovery period is projected for the nonresidential construction industry in 2011 with spending levels are not anticipated to be enough to show growth over 2010 figures.

While activity for institutional projects should hover near 2010 levels, there is likely to be a modest decline in commercial construction.  Overall nonresidential construction spending is expected to decrease by two percent in 2011, with 2012 seeing an increase of five percent in inflation adjusted terms.

"The key factors that have prevented an accelerated recovery include historically low lending rates for real estate projects, the lingering effects of general overbuilding and an unfavorable bond market that has hampered the ability for municipalities to get the requisite funding to build new schools and hospitals," said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. "Conditions should improve later this year and gain momentum as we move into 2012, particularly for hotel, retail and office building projects."

Baker added, "Two areas that are of concern that may adversely affect the design and construction industry are the increasing federal budget deficit that will force private sector borrowing costs to increase, and the likelihood that energy costs will increase in the coming years - as crude oil prices have doubled from their recent low in 2009."

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