New York, N.Y. — McGraw-Hill Construction last month released its 2008 Construction Outlook, which forecasts a drop in overall United States construction spending of 2 percent in 2008, fueled by tighter lending conditions and weaker job growth. Construction starts will decline to $614 billion, following an 8-percent decrease predicted for 2007.
“The credit crunch that emerged at mid-2007 continues to be a major concern for construction and the overall economy,” said Robert Murray, vice president, economic affairs for MHC. “As a result, we're not predicting downturns in the previously resilient multifamily and commercial segments, as well as continued weakness in single-family home construction.”
Murray did point out some positives. He predicts moderate growth in transportation projects amid a renewed emphasis on infrastructure maintenance and upgrades, spurred in part by the I-35W bridge collapse in Minneapolis. Financing from public sources will stay supportive, he notes, and the growth of public-private partnerships will also provide funding. Growth in “green” construction practices will spark demand for sustainable building design and materials.
Single-family housing will weaken because of the large inventory of unsold homes and diminished loan availability to homebuyers. A 3-percent drop in dollar volume is expected, with a 6-percent decline in number of units. Multi-family housing will drop 8 percent in dollars and 11 percent in units, following steeper 2007 declines. Condominium development is being slowed by increased scrutiny from lenders, coupled with lower homeowner demand.
Commercial building will drop 6 percent in dollar volume, MHC predicts, and 11 percent in square footage, caused by tighter lending and slower absorption of space. However, institutional buildings will rise 4 percent in dollar volume, with square footage rising 1 percent. School construction will strengthen as will spending on transportation terminals.
Manufacturing buildings will decrease 11 percent in dollar volume after a 40-percent rise in 2007, spurred by a number of ethanol plants and several very large projects. Public works construction will jump 3 percent, following the 5-percent jump in 2007.