Construction Projects – Level of Activity?

Let’s take a look at the generators of construction projects which will typically include some level of horizontal infrastructure improvement. Construction projects span from a small parking lot to service a new building, a local road or an interstate highway. This past weekend, we traveled (by car) 1,000 miles through PA, DEL, MD, VA, DC, and NC. Although primarily on interstate highways, the only projects under construction were in Washington DC. Not just a few but several mega-projects. New sewer lines, expanded treatment plants, schools, fire stations, new local roads, etc. are all vulnerable due to budget cutbacks. Let alone discuss the financial strength of our state and local governments. Let’s take a look at the generator of construction projects:

Private Sector: The residential and non-residential sectors are at work. The level of work is the lowest on record but work is underway – somewhere. There are several small sites under construction for single user stand alone buildings. Also,

I have been watching a new housing subdivision get started in Cornelius, NC. It is my understanding that the land was owned by government so the builder/developer does not have to carry the land. The price point for the homes is $400K - $500K. They have 6-homes under construction. Absorption rate will be? I will keep you posted! Do you have any new housing or non-residential projects underway in your market?

Federal Government – all of the projects currently under construction were designed and on the shelf ready for construction prior to the recession. It takes years to obtain funding approval for a project, start design, seek public input, complete bid process, and mobilize for construction. My guess is that limited or no funding has been allocated for new projects. The backlog of projects will be seriously depleted.

There are 90,000 State and Local Governments, Cities, Counties, School Districts, Universities, and Utility Companies. Most of these entities have slashed construction budgets and have shelved improvement projects. In most areas, School Districts have been laying off teachers not starting new school projects. The following statistics and comments are from USA Today:

Airport spending is up 12% and mass transit work up 17% due to the stimulus bill.

Columbus, Ohio had nine resurfacing projects completed last year paid by the stimulus bill. Other than these nine projects, Columbus, Ohio did not resurface any other road last year. Have you noticed any resurfacing projects underway in your market?

Las Vegas and Clark County, NV shelved $7,000,000,000 of new school construction. When will they start a new school?

Local construction is typically funded through a bond issue approved by voters at the ballot box. Statistics by The Bond Buyer:        Voter approval in 2008 - 82%
                                  Voter approval in 2009 - 66%
                                  Voter approval in 2010 - 59%

Private construction is at its lowest level since 2001 and local governments are spending at 2007 levels.

My point? There is construction work out there but not enough to spark an economic recovery. The stimulus bill caused some projects to be accelerated and the pipeline will not be replenished anytime soon. Pre-construction industry professionals need to rebrand and reinvent their business through partnering and proactive business development practices. Plan for the worst and expect the best.