Stimulated Construction

Anyone who says things don't look bleak out there hasn't looked outside their window in the past few days. But as they say — "when it rains it pours" — and Arizona has not been the exception, it's been the definition.

The Associated General Contractors of America recently put out a 2010 construction outlook forecast that stated nearly 9 in 10 contractors say there will be no recovery in 2010. Further outlook doom and gloom within the forecast included:

• privately funded construction activity is likely to decline even further this year
• expect demand for new manufacturing facilities to decline
• expect demand for new retail, warehouse and lodging facilities to drop
• fewer contractors plan to purchase construction equipment
• after a year of near-record industry layoffs, many doubt they'll be able to hire new staff this year

Many construction firms report already having to cut profit margins in their bids just to stay competitive, and some are submitting bids so low they will actually lose money on projects. ... But before we start digging a hole in the sand to stick our heads in — let's look at the flip-side of the coin.
One of the relatively few bright spots for the industry was the federal stimulus. Thirty-one percent of the 700 construction firms AGC surveyed say they were awarded stimulus funded projects.  Forty-six percent said the stimulus helped them retain an average of 24 employees each. Another 15 percent said the stimulus helped them add an average of 10 new employees per company, while 12 percent cite the stimulus as driving new equipment purchases.

Stephen E. Sandherr, the association's CEO, says that the stimulus is driving expectations for publicly funded construction activity in 2010 — including highway, water and sewer construction to improve or remain steady; as well as work on public buildings. 

"The stimulus is finally beginning to have a measurable, but limited, impact on the construction industry," Sandherr says.

In addition to stimulus-funded projects, contractors are also relatively upbeat about prospects for power and hospital/higher education construction. Many expect the demand for power facilities to be at or above last year's levels.

Overall, the AGC construction outlook points to another difficult year for contractors. "The only truly good news," Sandherr says, "is that construction costs remain at multi-year lows, providing good deals for anyone willing to begin a construction project."

www.agc.org