The Structural Steel Fabricators of New England (SSFNE) Annual Meeting key-note presentation was provided by Lindsay Fernald, an economist with McGraw-Hill Construction Research & Analytics, the research and consulting business unit within McGraw-Hill Construction. The following are excepts of her insightful informationfrom the SFNE Newsletter:
US Outlook:
At the national level, the total value of
construction starts will end three years of
declines with an 11% expansion in 2010.
This recovery in not universal however, as
the commercial & industrial sectors will
continue to weaken through next year. In-
stead, residential construction activity will
finally emerge from its four year retrench-
ment, leading the recovery, though starts
will remain at low levels of activity. Non-
building construction, boosted by stimulus
funds, will also turnaround next year
supporting the expansion. Meanwhile in-
stitutional construction will show only a
marginal 2010 gain.
New England Outlook
New England total construction activity
peaked in 2005 at $25 billion, a year ear-
lier than the nation, before beginning an
uneven downturn. This year, starts activity
will show the greatest contraction of 24%,
falling to a trough of $16 billion – a 37%
decline peak to trough.
A recovery is on tap for 2010 as the total
value of New England construction starts
will expand 9%. The residential & non-
building construction sectors will be the
principle drivers of the expansion
while institutional construction starts will
remain essentially flat at 2009 levels. Re-
gional commercial activity, however, will
remain a drag on starts through 2010.
Commercial & Industrial Construction:
The commercial & industrial sector experi-
enced a marked contraction in 2009, led by
declines in the retail and office construc-
tion sectors which plunged 44% and 58%
respectively. Rising joblessness has weak-
ened consumer spending & consumer con-
fidence, and has driven up office vacancy
rates, adversely impacting these sectors.
Though much of the correction will
have occurred in 2009, commercial con-
struction activity will continue to decline
in 2010. The industrial sector will rebound
in 2010, but activity will remain at historic
lows.
Institutional Construction:
The institutional construction sector expe-
rienced a more moderate decline this year,
and will contribute to the 2010 recovery.
Educational construction activity drives
regional institutional starts, with health-
care construction providing the second
most substantial boost. In many cycles in-
stitutional construction would continue to
weaken given its lagged relationship with
the greater economy, but stimulus funding
and state initiatives have helped buoy starts
activity.
Residential Construction
Residential construction led the downturn
in 2008 and weakened further in 2009;
peak to trough, New England housing will
decline nearly 70% from 2005 to 2009.
The single family market didn’t have the
same run-up in construction that the rest
of the nation experienced, but it collapsed
alongside the US, along with regional mul-
tifamily construction. Though this sector
is poised for a 2010 recovery, high home
prices and weak income gains pose a threat
to the rebound as potential buyers could be
priced out of the market.
Nonbuilding Construction
Nonbuilding has defied the downturn,
spurred by gains across most of its sub-
sectors. Highway & bridge projects have
dominated start activity in recent years,
posting strong gains since 2007. This
sector has benefited from the American
Recovery and Reinvestment Act, as $27
billion was allocated to highway construc-
tion projects. Indeed, in 2009, nonbuilding
projects (along with institutional projects)
dominate the largest projects starts in New
England from January to October 2009.
Nonbuilding construction will expand
through 2010
