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ElectroForecast Part 2

Feb. 1, 2003
The good times roll on as a steady but not spectacular construction market in 2000 continues to give many of your customers about as much work as they

The good times roll on as a steady but not spectacular construction market in 2000 continues to give many of your customers about as much work as they can handle.

As mentioned in part one of this two-part article, the search for qualified labor will stymie the growth opportunities for many of your customers, but there should be enough work to go around to keep companies busy in most areas of the U.S. Last month's article examined the key challenges ahead in the electrical construction market for 2000 and offered construction forecasts for the residential, office and utility markets. Here's a quick look at the state of construction in several more markets, including stores, schools and universities, and airports. Let's take a look at these markets:

Retail. Retail construction is linked in large part to the rise and fall of home construction, personal income and retail sales. When these indicators are healthy, so is the retail market. While this market is expected to cool off a bit in 2000, several major retailers have some ambitious growth plans. For instance, Wal-Mart plans to open 40 new Wal-Marts in 2000 and 150 new Supercenters, and the Gap plans to open 300 new stores this year. National retailers like these companies and other big-box stores like Home Depot, Lowe's and Office Depot accounted for much of the work in stores and other retail facilities over the past few years. But as many markets become saturated with these stores, construction will taper down. McGraw-Hill's Construction Information Group said that retail construction grew 4% in 1999 to 290 million sq ft for 1999, but will decline 7% in 2000 to 270 million sq ft because of slower, more deliberate growth in the economy.

Schools & universities. When trying to figure out how much construction there will be in the schools and universities in your market area, it truly is a numbers game that depends directly on the area's population growth. More new residents equals more demand for schools, and, eventually, colleges and universities.

A contributing factor to the growth in college and university construction is the demographic fact that the children of the early Baby Boomers are now college age. Baby Boomers are the largest single age demographic, and their children are filling seats in college classrooms in record numbers. McGraw-Hill's Construction Information Group says higher education enrollments will increase 7% over a 10-year period, rising from 14.9 million in 1999 to 16 million in 2009.

New construction and retrofit work in public schools will also grow, according to the Department of Education in its report, "The Baby Boom echo: No end in sight."

"There is no short-term fix to the very long-term condition of increasing enrollment in our nation's school systems," the report said. "While many school districts are using portable classrooms and resorting to double sessions, the fact remains that the nation simply has to build more schools." The McGraw-Hill forecast concurs with this statement, and says that in 2000 construction in this market will increase 4% to 223 million sq ft this year, with the Western states leading the charge with a 15% increase.

Factories. Construction of manufacturing buildings such as factories is also on the rise, according to McGraw-Hill's forecast. The report says that this market will increase 7% in 2000, to 160 million sq. ft., up from 150 million sq. ft. However, other forecasts say industrial vacancy rates will rise next year, and this could dampen the need for more factories. According to CB Ellis, vacancies at these facilities will rise to 11.5% by the end of 2000.

U.S. factory construction actually depends quite heavily on global economics. When the U.S. dollar is strong, it costs more for foreign companies or consumers to buy U.S. goods. That means American products are less price-competitive than comparable products manufactured overseas, and this cuts into the demand for U.S. factory output.

Another economic indicator to watch if you are involved in industrial work is statistics for capacity of utilization. When U.S. factories are busy, the capacity of utilization figure is high, but when demand for products is low, the percentage drops. The capacity of utilization for factories is now at about 80%.

Airports. If you are in one of the following markets, look for spending on airport construction to take off: Atlanta, Chicago, Los Angeles, Dallas-Fort Worth, San Francisco, Denver, Miami, Newark, Phoenix and Detroit. According to the Airport Council International and Engineering News Record magazine's research department, these airports-the 10 busiest in the U.S.-all have major construction projects either now underway or planned for the coming years. These projects include light-rail systems, terminal and parking lot construction and upgrades, and roadway lighting and improvements. Much of this construction will be federally funded, and if some of the bills now on Capitol Hill ever get signed into law, the federal funds for airport work will run into the billions over the next five years.

Hospital and health-care facilities. While many hospitals seem to be continually upgrading their facilities, the national picture for health care-related construction is not that bright, and McGraw-Hill sees overall health-care construction dipping 6% this year to 81 million sq ft.

Industry consolidation and cost-cutting due to pressure from health insurance programs will keep a lid on construction in this market for the foreseeable future.

Hotels. In the hotel market, look for growth in the construction of luxury facilities of over 100,000 sq ft, but for fewer smaller hotels to be built. Contractors in hotel hot spots like Las Vegas and Orlando were the beneficiaries of an enormous amount of hotel construction in the past few years. In Las Vegas, thousands of new hotel rooms were added to what is already one of the largest concentrations of hotels in the world. But the hotel construction boom peaked in Las Vegas in 1997, and over thepast few years construction activity in Glitter Gulch has declined. McGraw-Hill's Construction Information Group expects this decline to continue in 2000 on a national basis, with a 6% drop in hotel construction across the U.S. to 75 million sq ft.