The half-full glass

While contemplating this month’s column, I noticed that the glass on my desk was half-full of coffee—cold, cruddy, day-old coffee from the community pot—that I poured into the glass so I could give my cup its annual cleaning. Why I didn’t throw the coffee away, I can’t imagine.

By Michael Ivanovich, Editor-in-Chief December 1, 2008

While contemplating this month’s column, I noticed that the glass on my desk was half-full of coffee—cold, cruddy, day-old coffee from the community pot—that I poured into the glass so I could give my cup its annual cleaning. Why I didn’t throw the coffee away, I can’t imagine. I must have imagined that I might drink it or something.

Nonetheless, my glass is half full. I guess this proves I’m an optimist. Which brings me to my point: perspective.

With the economy being what it is, it’s tempting to be negative. The economic earthquake that hit in September caused a lot of panic, and we’ve been experiencing shockwaves ever since. But I’ve been tracking various sources, and I believe things are not as bad as they seem. So here’s my holiday message to you all: Look for the bright spots; there’s more than you may be aware of.

In October, I attended a webcast by Reed Construction Data’s chief economist, Jim Haughey, who’s been analyzing and reporting the numbers of the construction market for more than 20 years. In his October webcast, Haughey projected a drop in the growth of the nonresidential construction market—from double-digit growth years of 2006, 2007, and 2008—to a growth of around 1% in 2009, or essentially remaining flat. This equates to a total revenue of around $450 billion.

For a little perspective: In 2006, the nonresidential new construction market was around $320 billion, according to Reed Construction Data. I didn’t hear anyone complaining that 2006 was a bad year.

Haughey looks primarily at construction starts. The $450 billion does not include renovations and retrofits. Renovations, retrofits, and replacements would add significantly to this number.

But that was October, and a lot has happened since then, right? America has lost hundreds of thousands of jobs, U.S. automakers parked an empty dump truck in front of Congress that they want loaded with cash, and the stock market goes down every time Treasury Secretary Hank Paulson opens his mouth. So what is Haughey saying now?

Well, I just got off the phone with Haughey (it’s Dec. 10 as I write this), and he said that the 2009 numbers are a bit lower than his October forecast, but not much. He said that the damage has been front-end loaded—we’re seeing the worst of it now, especially in school, office, and retail construction. Hospitals, utilities, stadiums, etc. are still going strong, generally speaking, and so are projects where the money was allocated and available for construction spending.

Basically, Haughey said, the September panic did the damage. Financing is beginning to get worked out, and nonresidential construction should snap back relatively quickly in 2009 and into 2010.

So, out with the bad coffee, and in with some fresh water. And a toast to your health, happiness, and success—in that order. See you in 2009.

Editor’s note: Jim Haughey is authoring an article for our January issue on the 2009 and 2010 construction markets, so stay tuned.

Send your questions and comments to: Michael.Ivanovich@reedbusiness.com