In an article recently released by the American Institute of Architects (AIA), it was found by the AIA Consensus Construction Forecast panel that nonresidential construction spending will decrease by 5.6% during 2011 followed by a recovery of 6.4% in 2012. These findings come despite recent good economic reports for the industry where June construction starts increased 15%, according to an article from McGraw-Hill Construction, and July construction employment reaching a 15 month high as provided by a press release from The Associated General Contractors of America.
What does this mean for your construction company?
The market isn’t getting any friendlier anytime soon. If the AIA’s study is accurate, it looks like spending will continue to decrease and that June’s increases were an anomaly. The AIA, in addition to this study, also releases the Architectural Billing Index which is a lead indicator for construction spending which has consistently decreased for the past 3 months. These decreases represent decreases in construction spending in the future. Given this, the current market place is expected to remain the same where project bids are extremely competitive with much lower estimated margins on available work when compared to pre-recession margins.
Construction companies should continue with the same strict budgetary polices they employed when the 2008 recession initially hit. The industry is not expected to start seeing recovery until next year, despite the recent good news with construction spending and employment.