Mixed Construction Outlook For Region

By Paul Fournier | September 28, 2010

The New England economy, which has been stronger than the United States as a whole, will slow earlier than that of the nation in 2007. This is expected to have a dampening effect on the value of construction awards for publicly bid jobs, but the total value of public and private construction actually put in place will exceed that of 2006.

Contractors and equipment dealers are anticipating such a leveling off in contract awards this year, as evidenced in the latest forecast released by CIT Construction, a unit of CIT Group Inc. The Tempe, Ariz., company's 31st annual CIT Construction Industry Forecast outlook for New England indicates that construction industry leaders here are cautious about work prospects for 2007.

New England contractors are hopeful of their bidding potential, with 37 percent preparing to make more bids in 2007 and close to 80 percent expecting bidding activity to match or exceed 2006 levels.

Overall construction activity will remain at record levels in New England this year, with a total of $39 billion worth of construction — excluding residential — to be put in place, a 6-percent increase over last year according to data prepared by FMI Corporation. The Raleigh, N.C., management consulting firm tracks both public and private construction through collection and analyses of building permits, trades sources and other sources.

Of the projected $39 billion in work, nearly $28 billion will take place in the construction of nonresidential buildings. This is 7 percent more than 2006's performance. Educational building continues to be the 800-pound gorilla of the group, with almost $12 billion in construction expected to be put in place in 2007. Commercial construction ranks second, at $3.8 billion, while transportation building is forecast to exceed $2 billion.

Non-building construction to be put in place is also expected to exceed last year's showing according to the consultants, who predict a total of $11.2 billion for this category, a gain of 7 percent. In this grouping the value of highway and street construction to be put in place will surpass $4.2 billion, a rise of 5 percent. All other major components of non-building construction are likewise predicted to improve in 2007: power ($3.5 billion, up 3 percent); sewage and waste disposal ($1.7 billion, 8 percent); water supply ($1.1 billion, 7 percent); and conservation and development ($0.5 billion, 7 percent).

While a gain is predicted for total public and private construction to be put in place, a leveling off is seen for awards for publicly bid construction projects in 2007.

According to Reed Construction Data (RCD), parent of Associated Construction Publications — a group of 14 construction magazines including New England Construction — the value of publicly bid, nonresidential building construction awards in New England will be approximately $10.24 billion in 2007 (see accompanying chart). This is a 1-percent decline from RCD's forecast of $10.36 billion for 2006, a record high for this category. Included in this grouping are the following types of buildings: amusement, government space, hospitals and clinics, hotels, industrial, libraries and museums, military, miscellaneous commercial, government, nursing and assisted living, office, parking, religious, retail, and schools and colleges.

RCD also foresees a significant decline in awards for civil, or non-building, contracts for this region in 2007. A total of $2.6 billion is predicted for this category, which includes miscellaneous civil, other civil, and roads and highways.

Miscellaneous civil is the only one of the three expected to see a gain in 2007, rising more than 30 percent to $302 million. Included in this group are the following types of construction: athletic fields and courts, excavating and grading, fencing, flood control, machinery and supplies, military non-building, miscellaneous, parks, landscaping, pavement markers, power lines and stations, railroad and subway, sidewalks, curbs and gutters, site work, swimming pools, tanks, and tunnels.

Other civil construction awards will toal approximately $1.2 billion, a decline of about 8 percent from 2006. This category of work consists of airport construction, bridges and culverts, dams, canals, marine work, water and sewage piping, and water and sewage treatment.

A decrease in roads and highway construction awards is also forecast for New England in the coming year, with an estimate of $1.1 billion amounting to a 32-percent drop.

Misc. Civil Other Civil Roads/Highway Total Civil Buildings Total
2003 371,880,153 1,111,797,583 705,061,363 2,188,739,099 8,752,671,468 10,941,410,567
2004 259,913,657 1,027,129,524 684,446,531 1,971,489,712 7,474,943,734 9,446,443,446
2005 418,999,726 1,174,313,437 1,430,160,838 3,023,474,001 9,474,061,811 12,497,535,812
2006 231,265,848 1,320,761,842 1,631,773,403 3,183,801,093 10,355,473,898 13,539,274,991
2007 302,261,771 1,208,885,858 1,102,892,985 2,614,040,614 10,240,311,711 12,854,352,325
Data courtesy Reed Construction Data