Construction braces for slowdown in Northwest Indiana
January 12, 2009
By Erik Potter
Post-Tribune staff writer
Local and national experts expect the economic turmoil that first hit the residential housing market in 2007 to spread to the commercial construction market this year.
The Associated Builders and Contractors, a national trade group for construction firms, issued a report last month detailing the expected business climate in 2009.
The forecast is almost universally gloomy across all sectors of the industry: a 20 percent fall in retail and restaurant construction from 2008, a 20 percent decline in hotel construction, a 15 percent to 25 percent drop in office construction, and a 25 percent to 35 percent fall for manufacturing construction. Institutional buildings, such as schools and hospitals, will likely see a 5 percent slip from 2008. The one bright spot is power construction, especially in alternative energy, which is expected to grow.
Industry fortunes will continue to sour in 2009 and 2010, predicted Associated Builders and Contractors Chief Economist Anirban Basu in the group's annual report.
Locally, the current crop of construction projects, arranged before the credit crunch hit in the summer of 2007, are nearly all completed, and tight credit markets and a skittish business climate mean new projects aren't coming up to replace them.
"There's not an abundance of work out there to bid (on)," said Jeff Brant, vice president of Schererville-based Brant Construction. "Projects -- banks, churches -- are really down right now. Everybody is holding onto their money."
Locally, the $3.8 billion BP Whiting expansion will help mitigate the drop in construction opportunities elsewhere, but the strict qualifications for bidding on the BP project likely mean those benefits will be concentrated to a few firms, Brant said.
Statewide, construction backlogs -- the number of projects firms have on their books for the next year -- is down 5 percent to 15 percent, estimated J.R. Gaylor, president and CEO of Associated Builders and Contractors of Indiana.
"It's really the availability of credit and investment that's hurt us across the board,"?Gaylor said, adding that lines of credit and bonding is what allows developers to finance new buildings on the speculation that someone will buy or lease them.
A stimulus package focused on infrastructure in the new Congress could help the construction industry, which saw its national unemployment rate (not seasonally adjusted) jump from 9.6 percent in December 2007 to 15.9 this past December. Indiana saw 5.7 percent fewer construction jobs in November versus the previous year.
But the time involved for a Barack Obama administration to get sworn in, negotiate a stimulus bill, choose the projects to fund and get those projects under way could stretch into the latter portion of 2009.
"That's why our outlook for 2009 remains quite bleak,"?Basu said.
William Putz, president and owner of Trinity Construction Corp. in Merrillville, said he hopes to see a capital gains tax abatement as part of a stimulus package. "Business will jump on that and that will help," he said.
Looking long-term, Putz took an optimistic view. Eventually, people will have to start replacing their worn-out goods, factories will modernize and the economy will recover. "General Motors, Ford, (they) will have to redo and retool and rebuild their plants. Auto workers don't do that. Construction workers do that."
Contact Erik Potter at 648-3120 or firstname.lastname@example.org.