Consulting-Specifying Engineer - January 2009 - (Page 48) care facilities, and medical office buildings has been steady in nominal dollars, but declining in inflation-adjusted dollars for more than a year, though the nursing home sector has been expanding. This weakness was due partly to shortages of skilled tradesmen, specialized designers, and contractors comfortable with these complex projects. The worldwide cutback in facility construction has lifted this constraint. Nonetheless, credit access delays and higher borrowing cost are expected to cause a brief drop in healthcare construction activity early in 2009. Overall, healthcare construction will fare relatively well during the recession because its largest source of income—patient charges—will continue to expand. The assisted-care and medical office building sectors have become private commercial markets in recent years, and hence react to abrupt changes in the economic environment just like shopping centers. Construction spending for assisted-care facilities slowed sharply late in 2008 as developers’ financing arrangements were disrupted. The progressively thawing credit freeze will permit some bounce-back from this in 2009. Assisted-care developers have few concerns about the supply of tenants who are financed by Medicare or accumulated savings. Construction spending for medical office buildings plunged sharply at the onset of the credit freeze and is projected to decline 4% in 2009. Hospital construction spending slowed in 2008 and will not expand in 2009. This will be the first “no growth” year in a decade. Hospital project starts did not decline through November and job-site construction spending continued to expand through October. However, hospitals have begun to trim their 2009 capital budget and have some work scheduled for a 2009 starts on hold, assuring no growth in jobsite construction spending in 2009. Manufacturing The manufacturing construction boom is over. Manufacturing construction spending tripled in the past four years, and will decline for at least two years at a double-digit pace, measured after adjusting for changing project costs. The recent boom was largely for process improvements in the metalworking, oil, and petrochemicals industries and for commodity processing. The recession ends the need for these investments for several years. Factory production plunged at a 10% annual pace at the end of 2008 to trim excess inventories resulting from the abrupt drop in consumer spending. Factory capacity use fell to 75.4% in November, well below the usual 80% threshold for rising investment in factory capacity. The use rate will dip to the low 70s by the summer of 2009. Haughey is chief economist with Reed Construction Data. He has more than 30 years of experience as a business economist, including 20 years monitoring the construction market. He has a doctorate in economics from the University of Michigan. Input #223 at csemag.com/quickResponse http://www.yaskawa.com http://www.yaskawa.com/E7 http://www.yaskawa.com http://www.csemag.com/quickResponse
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.