Gilbane predicts stagnant construction market

Posted 12/21/11

PROVIDENCE – Construction markets will remain stagnant in the first half of 2012 and a recovery in building activity will lag behind the rest of the economy, Gilbane Building Company predicted in its annual industry report.

The report cited continued declines in public-sector budgets combined with soft architectural billings in 2011 as indicators that the flow of building projects in the pipeline for next year remains light.

“We may still expect further declines in construction investment projects dependent on tax receipts and diminished state and local government fund balances,” the report said. “The construction market recovery will lag the overall economic recovery and will take much longer due to the severity of current conditions.”

On the positive side, the Providence-based building company noted that new construction starts and spending has picked up during 2011 and has been accompanied by modest construction job growth over the last six months. Industrial production of construction materials is also up year-over-year for the past five months, the report added.

In the negative column, Gilbane cited the cement industry operating at 60 percent capacity, public-sector construction spending declining throughout 2011 and total architectural billings down for five of the last six months with institutional billings down for the whole year.

The slowdown in architectural billings means contractors can likely expect relatively few new projects starting in the near future, Gilbane said.

Architectural Billings Index results “consistently below 50 indicate there will be a decrease in construction spending 9 to 12 months later. Expect a decrease in construction spending from the fourth quarter 2011 through the second quarter 2012,” the report said.

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