Construction Remains Strong

Staff -- Consulting-Specifying Engineer, 12/1/2000

Decreasing vacancy rates and infrastructure improvements will continue to drive North American construction, according to economists who recently made presentations at CMD Group's North American Construction Forecast for design and construction professionals, www.nacf.com.

With the national vacancy rate for downtown office buildings at just 6.7 percent, and the rate for industrial properties down to 6.5 percent, Hugh Kelly, chief economist with Landauer Associates, Inc., New York, pointed out that most industrial real estate transactions are occurring in the 20,000- to 100,000-square-foot range. Similarly, most retail sector activity is centered around areas of less than 75,000 square feet.

"While most institutional investors are still buying big spaces, the greatest number of [industrial] deals are in this [smaller] range," said Kelly. "It's a hotbed of private owners, involved in just-in-time delivery requiring smaller warehousing spaces."

Kelly also linked infrastructure investments to real estate activity in the distribution and storage sector, predicting that port improvements in New York and Oakland will increase warehouse spacing demand in those cities. Similarly, said Kelly, highway improvements will have the same effect on industrial real estate activity in some regional hub cities.

Overall, North American construction is projected to post a 1.3-percent increase in 2000, a 1.9-percent decrease in 2001 and resumed growth of 1.3-percent in 2002, according to Bill Toal, chief economist with the Portland Cement Association, Skokie, Ill.

Ray Torto, the principal and managing director for Torto Wheaton Research, Boston, concurred that in the next couple of years, construction will remain strong.

"Construction will heat up, returning to the level of the 1980s," Torto noted. "Construction loans are really picking up and are already back to their previous highs."