Nonresidential Construction Predicted to Increase in 2008

December 7, 2007 • Raleigh, N.C.-based FMI, management consultants and investment bankers to the construction industry, announces the Construction Outlook: Fourth Quarter 2007 is now available. FMI's outlook for construction in 2008 has been revised slightly downward since the third quarter, but certain segments, such as nonresidential and nonbuilding, will remain strong, the report states.

The Construction Outlook, a quarterly construction market forecast developed by FMI's Research Services Group, notes that FMI is not yet predicting a national recession or a downturn in nonresidential construction in 2008, although the outlook is tipped slightly downward.

 

Nonresidential construction was booming in 2007 and will increase again in 2008, although at a slower rate, the report notes. Nonresidential construction will expand at a 5-percent rate in 2008 and a 4-percent rate in 2009 as the declines in residential begin to lower demand for certain nonresidential segments, the report predicts.

 

“There are several drags on the economy such as housing and credit tightening,” said Heather Jones, construction economist for FMI's Research Services. “However, resilient consumers, businesses and exports have so far been able to prop it up.”

 

The report also comments on the housing correction. It is not expected to begin recovering until 2009, the report states. However, FMI believes that put in place construction will realize a smaller decline than housing starts due to rising labor and material costs, upgrades and the use of higher-end materials. Despite large declines in total residential and single-family construction, both will remain at a high level.

 

Historical information in Construction Outlook is based on building permits and construction put in place data as provided by the U.S. Commerce Department. Forecasts are based on econometric and demographic relationships developed by FMI, on information from specific projects gathered from trade resources, and on FMI's analysis and interpretation of current and expected social and economic conditions.