Construction industry update: “…gloom and doom for bricks and sticks.”

Posted By Mike Padgett

Nov. 13, 2008 

A new report from an international consulting group says the future of the construction industry across the United States is so bleak, the industry might seek government support.

“We have seen both public and privately funded construction projects being placed on hold, incredibly, some well into the construction phase as well as during programming and design phases,” says Julian Anderson, president of Rider Levett Bucknall.

This adjustment in the construction industry suggests that, in the near term, “we are likely to experience a continued downward spiral with job losses, reduced construction volume, investor and lender fright and calls for government support of the construction industry,” Anderson says.

 “In other words, loads of gloom and doom for bricks and sticks,” he says.

The company provides property and construction consultancy advice throughout the Americas, Asia, Europe, Middle East and Oceania. It has 

Without some major capital works programs launched by the government, “the national construction industry will suffer for several years with significant downward pressure on prices and a dramatic reduction in overall capacity, followed by a slow recovery,” according to a Rider Levett Bucknall announcement today.

Already, the national construction industry is seeing a downtown in overall construction spending. The value of construction put in place for the first three quarters of 2008 was 5.9 percent below what it was for the same period in 2007.

The quarterly report also shows that in the metro Phoenix market, construction costs escalated 5.6 percent from July 2007 to July 2008, compared to 8 percent for the same period from 2006 to 2007.

 “Bailouts and buyouts aside, the real questions for our industry are just how long the financial crisis and its attendant credit freeze will last and what long-term effects it will have on capital investment in all sectors of construction,” says Peter Knowles, Rider Levett Bucknall executive vice president.

The Rider Levett Bucknall analysts add that while they expect this de-escalation will continue as projects stall and competition for work continues, there is some risk that the massive amounts of liquidity being pumped into the economy will stimulate inflation, which then would produce significant cost escalation within a depressed market.

Arizona, which for many years has been one of the nation’s fastest-growing states, is expected to feel its share of the national economic pain. Already, city and state budgets are in deficit of more than $1 billion, says Scott Macpherson, principal of Rider Levett Bucknall’s Phoenix office.

“With the $1.4 billion higher education economic stimulus package approved in July, we expect to see an increase in construction activity and in general, a slow but steady gradual upturn in the Arizona economy over the course of the next year,” Macpherson says.

Macpherson adds that many of the major projects under construction in metro Phoenix “were designed and under contract prior to the start of this current economic downturn.”

“In these instances,” he says, “the development teams have made the bold decision to continue on with their projects, although in some cases they have been scaled back a bit.”

Rider Levett Bucknall’s U.S. offices, besides Phoenix, are Boston, Denver, Honolulu, Las Vegas, Los Angeles, metro New York City, Orlando, Portland, San Francisco, Seattle, and Washington D.C.  For more information about Rider Levett Bucknall, visit www.rlb.com.

 

(To avoid missing the next story, sign up for email alerts in the box in the right rail. Your email address will not be used for any other purpose.)

Nov 13th, 2008

Comments are closed.