Whenever two or three architects gather — over the coffeepot, at a cocktail party, in the elevator —a single topic emerges: When will the recession end? Faced with frequent layoffs and calls from their bankers, and with a dynamic marketplace that seems to be constantly shrinking, principals have been relying on help wherever they might find it, whether through anecdotes, colleagues, advice from professional practice consultants, or Ouija boards. Then on Friday, October 16, 2009, the construction economists spoke.
Interest in where the markets will trend always draws a crowd. We all want to know the effect of the general economy on our businesses, and how prices of commodities and even world trade will affect our work and our clientele. This year, more than most, all eyes remained on center stage at the Capital Hilton in Washington, D.C., searching for clues. In full disclosure, McGraw-Hill Construction sponsors the annual Outlook Executive Conference, and I moderated this year’s event. However, as an editor I listened with as rapt attention as any onlooker. What would happen in 2010?
In two days, we heard tempered remarks from all concerned. David Wyss, Standard and Poor’s chief economist, led off with an analysis of the general economy, which he characterized as showing “glimmers of hope.” He cited upturns in housing prices and improving financial markets, though unemployment remaining from the “synchronized sinking” of the world recession will hurt the construction industry. How are we emerging? With a bound? No, Wyss sees us “crawling out” of a recession that many have characterized as the Great Recession (with capital letters), headed toward a “slow recovery.” Risks remain in the levels of unemployment, in the price of oil, and in the volatility of financial markets, any one of which could upset the slowly rising tides.
The shared wisdom of panelists and speakers regarding the stimulus for the construction industry can be summed up in a single word: Wait. Initial “shovel-ready” stimulus dollars went to infrastructure such as highway projects, even to asphalt, while the more complex building projects that require preparation and careful documentation should hit the architectural marketplace next year. The General Services Administration and other
governmental agencies will receive much of the stimulus funding, in projects as massive as the new headquarters for the Department of Homeland Security in Washington, D.C., or in the energy retrofit of smaller regional office buildings.
Robert Murray, the Vice President for Economic Affairs for McGraw-Hill Construction, spoke last, and presented his long-awaited 2010 Construction Outlook for U.S. construction activity. However, individual sectors of the industry are behaving independently. Single-family housing has hit bottom and is beginning a slow upward trend. Commercial building “is still in deep decline,” according to Murray. Surprisingly, institutional building, which has been a bulwark throughout the past two years, is dropping in volume as funding sources dry up. The educational sector, another strength of the last two years, is weakening. Public works and infrastructure, by contrast, “are set to turn up.”
Murray and his peers do not see us rebounding with the élan of previous recession and recovery cycles, where low points would be followed by “V”-shaped jumps upward, but by a more deliberate “U”-shaped change that will not reach the heights of 2005—06. As a nor’easter was bearing down on the East Coast of the United States, Murray summarized by recognizing movement from the depths of the recession that began in 2007 that may reach 11 percent overall above the low points of 2009. Growth is relative in his scenario, however.
Is the stimulus working? When can American firms plan for a loosening of credit by the marketplace? Which sectors of the client community will be seeking architectural and building services? The Outlook addressed these questions and more, and if the prognostications prove false, at least for two days architects, engineers, constructors, and owners had data and facts to rely on, and could banish the anecdotes and vague worries of the past months to the dustbin. Examining the facts, and then analyzing them, provides momentary comfort and may help to build confidence, so necessary for the coming year.
If you wish to write to our editor-in-chief you can email him rivy@mcgraw-hill.com.
