Construction on the Mend...Kind of

November construction spending statistics tracked at $807 billion, a 1.2% increase over the revised number from a slightly disappointing October. The figure also rivals that of November 2010, and the growth trend appears to be one that will continue. However, “improvement” is a relative term and, in this case, the rebound is expected to be fairly slow over the next 12 months at least.

“Construction spending may take a dip from here for a month or two, but certainly for 2012 we expect recovery in the construction numbers, but a slow recovery,” Moody’s Analytics Senior Economist Andres Carbacho-Burgos told NACM. “Things are more likely to take off 2013, especially with fairly strong growth expected in residential. Mainly, as the economy starts to recover and unemployment is reduced, you’ll get better income growth which will release pent-up housing demand.”

Commercial real estate, while not likely to crash, likely will lag behind the expectations of housing activity and could be several years out from a hot recovery, said Carbacho-Burgos. The pent-up demand existing in residential simply hasn’t come to fruition yet because commercial’s boom-bust cycle occurred a couple of years later and most larger metropolitan areas still show above average vacancy rates. Still, the forecast for commercial real estate likely has fewer
volatile factors to change the segments direction than its counterpart on the residential side.

(Note: See more analysis on this topic in the coming edition of NACM eNews, out late-afternoon Thursday. Check for it at www.nacm.org or, if an NACM member, in you e-mail box).

Brian Shappell, NACM staff writer

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