by Shane Henson — November 16, 2012—Despite the dire outlook voiced during the recent presidential campaigns, the construction industry is actually poised for slight growth, according to the third quarter 2012 Construction Outlook report released by FMI, a provider of management consulting and investment banking to the engineering and construction industry.
FMI says the industry forecast is calling for an eight percent increase in total construction put in place (CPIP) for 2013. Contributing to this positive forecast is more robust growth in residential construction, as well as a few strong markets in nonresidential and non-building construction.
The focus for 2013 will be on the movement of private money back into the markets, says FMI. For the economy to grow at a faster rate with the fiscal cliff looming and state and municipal budgets still in repair mode, it is reportedly the private markets that must lead the way. Total CPIP for 2013 is forecast to be $892 billion, a solid improvement over the last few years, but still just edging out 2003 levels of construction activity, the report notes.
Per the report, nonresidential construction trends and forecasts by sector include:
- Lodging: Hotel developers will renovate before building new properties. Bank loans will be hard to justify until occupancy and room rates remain consistently high.
- Office: Through the first two quarters of 2012, the U.S. office sector has now absorbed 10.4 million square feet, 100,000 square feet less of net absorption than was generated over the first six months of 2011. This is not yet enough activity to compare with prerecession highs, but CPIP is expected to improve four percent in 2013.
- Commercial: Expect more rethinking of commercial construction space to accommodate smaller stores. Look for increasing multiuse projects.
- Healthcare: New healthcare construction will include a growing number of renovation projects to update current facilities for modern hospital design, using more technology in the rooms as well as for improving air quality and reducing energy usage.
- Education: Expect significantly less funding from states for K-12 schools.
- Religious: The lending environment continues to be a challenge for many congregations.
- Public safety: Despite overcrowding in prisons, public safety construction is expected to remain slow for the next couple of years, at least with only one percent growth in 2013 to $10.2 billion.
- Amusement and recreation: Money for sports stadiums will be hard to find from local government investment, and banks will be reluctant to lend to anyone who could not already pay for the project from cash flow.
