Wednesday, July 23, 2008

AIA sees modest declines in 2008, steeper drop in 2009

We mentioned earlier today (see previous post) that the AIA did not see bright prospects for architecture firms and here's what we meant...

The AIA last week put out a press release spotlighting its semi-annual Consensus Construction Forecast, a survey of the "nation's leading construction forecasters" that includes the outlook for the second half along with a prognosis for 2009.

The Forecast calls for a 1.2% decline in construction of nonresidential facilities in 2008 with a more significant 6.7% downturn in 2009. The prognoses for commercial and industrial buildings are even worse, with an especially large decline in the office and retail sectors. The two largest institutional categories, health care and education facilities, should see a slight increase this year.

"The more pessimistic forecast this round stems from the lack of growth in the overall economy, the ripple effect from the faltering housing market, and the anxiety in the credit markets leading to a restriction in lending for all types of construction," said AIA Chief Economist Kermit Baker.

Baker did point out, however, that, the slowdown should be less severe than the construction recessions of the early 90s and earlier this decade.

We've said it before, but it really does depend on which market you are working in. Health care facilities are projected to basically hold steady this year (0.2% growth) and next (1.1% growth), but they are the only market sector projected to grow in the next 12 to 18 months. If you aren't in a hot market, keep your margins in line and try to weather the storm.

Click here to read the release, which includes detailed market segment consensus growth forecasts for commercial/industrial (retail, office buildings, hotels, industrial facilities) and institutional (health care, education, amusement/recreation, public safety, and religious) facilities.


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