Where's Your Market Headed in 2010? Some Sectors Looking Up

Of course it’ll still be way off the pace of its recent heyday but Washington State’s construction industry can expect to see an uptick in 2010 compared to 2009 said Cliff Brewis economist for McGraw Hill Construction. With a host of caveats that could turn this hopeful prediction around Brewis said the state could see nearly $15 billion in construction start in 2010 compared to the $12 billion expected total for 2009.

Brewis made his remarks at McGraw Hill’s 2010 Outlook for Construction Activity event co-sponsored by AGC.

Other positive notes cited by Brewis are continued improvement in residential construction – a bellwether for commercial construction – and federal stimulus funding that will have a significant carryover into next year.

Much of the predicted upswing is in single housing construction but other sectors that Brewis expects to grow in the state are multi-family housing health education highways and water supply. Sectors he expects to be lower next year are manufacturing office and retail.

To see Brewis’ powerpoint presentation click here. Slide number 21 includes a recap of the 2010 estimate by construction industry sector.

Brewis said that the outlook while relatively positive is hardly rosy and he notes several limitations going forward. The markets for municipal bonds and commercial paper are functioning again he said but banks remain extremely cautious in terms of issuing loans. Bank lending standards will stay tight impeding development and rising defaults on commercial real estate mortgages make the situation even more tenuous.

Employment will remain weak in 2010 exacerbating challenges for the commercial building sector as office vacancies stay high. Weak employment also means state and local finances won’t turn around soon. Other factors such as the price of oil which has been climbing once again loom as potential challenges.

Brewis said the construction industry historically has gone through six to eight year boom-and-bust cycles but is now concluding an extraordinary 18 year cycle marked by an unprecedented amount of construction. He says the economy at large seems to have bottomed out and in 2010 we will see a continuation of the very recent trend of positive GDP growth. For 2010 he expects the U.S. economy to expand at a positive-but-lackluster rate of 1.8 percent.