Florida’s 2009 Outlook – A Minor Decline?
By Scott Judy
Considering the major overall declines that Florida’s construction industry has been experiencing in recent years – driven mostly by residential construction – the 7% drop in total construction for 2009 should sound like welcome news to some Sunshine State contractors.
McGraw-Hill Construction is forecasting that the value of new 2009 contracts will total about $30.8 billion, down from the current estimate for 2008 of nearly $33.2 billion. (As perspective, the state’s 2005 total construction value was $71.7 billion.)
There are similarities and differences between this year’s outlook for Florida and last year’s. First, residential will continue to decline. While this market fell from its 2007 total of $22.3 billion to just $13 billion last year, McGraw-Hill is forecasting an 11% further decline for 2009, to an estimated $11.5 billion. However, McGraw-Hill Construction’s senior economist Jennifer Coskren offered words of caution about the residential market in general as relating to Florida in particular: “The market remains fragile and the downside risks remain large.”
Readers should keep in mind that this sentiment is similar to what McGraw-Hill Construction projected for the residential market in 2008. Said Coskren last year: “We expect that the worst is over, though in my opinion the risks remain weighted on the negative and contract value could certainly turn in a worse performance than the 9% decline we have forecasted (for 2008).”
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As contractors know, Coskren’s concerns about the remaining risks hovering over the residential market proved to be correct, so the continuing “downside risks” she mentions should be kept in mind for 2009.
Unlike last year, when it was forecast to increase, Florida’s nonresidential sector is now headed for a significant downturn, according to McGraw-Hill Construction. The overall nonresidential market is expected to be 13% lower than last year, and is forecast to total about $11.9 billion overall. The commercial and industrial segment will be hardest hit, the company estimates, with a 23% decline predicted, for a total of about $5.6 billion in new contracts. That would compare to last year’s total for this market of about $7.3 billion.
Institutional construction, which includes health care and education work, is also projected for a decline, though by just 2%.
Nonbuilding construction, meanwhile, is expected to be the lone positive sector for Florida construction in 2009. McGraw-Hill Construction is predicting a 14% overall improvement here, with a 2009 total of about $7.4 billion. That would compare to 2008’s final estimate of roughly $6.4 billion.
Within the nonbuilding segment, public works is projected to improve by about 9% over 2008, and to experience about $6.8 billion in new projects during ’09. That would compare favorably to last year’s nearly $6.3 billion estimate.
Electric utility work in the state is expected to total about $517 million during 2009, more than double the $171 million total for 2008.
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