Midwest commercial construction market steady

November 27, 2007
COMMERCIAL : TRENDS & ANALYSIS


Part two of four

While the Midwest commercial construction market is not experiencing dazzling growth, contractors say it remains steady with some areas of growth. The region’s construction market has been unaffected by the financial market downturn, as seen in the latest release of the Architectural Billings Index from the American Institute of Architects, Washington, D.C.

Growth picked up for architectural billings in the Midwest during October following a slowdown during the summer, according to the ABI, released Nov. 16. The Midwest was the only region that saw the rate of growth increase during the month.

Energy and power facility construction will drive nonresidential growth in the Midwest for 2008, says Ken Simonson, chief economist for the Associated General Contractors, Arlington, Va. “The brightest prospects are energy-related projects. This includes … ethanol plants across the Midwest,” he says.

However, glass-heavy project types will likely start to decline, Simonson says. “There will be widespread slowdowns in 2008, especially in the previously hot office, hotel, resort markets.”

Despite Simonson’s predictions, Christine Shaffer, marketing manager for Viracon, Owatonna, Minn., says office and hotel construction are the two largest areas of growth for the company. In the Midwest, Arkansas, particularly in Little Rock, and Illinois, in and around Chicago, are booming, she says.

Rod Van Buskirk, president and owner of Bacon & Van Buskirk of Champaign, Ill., says he doesn’t expect to see the downturn in glass-heavy segments of the nonresidential market until after the presidential election. In the meantime, the nonresidential construction climate in the Midwest is “overall, very good,” with some communities stronger than others. “In our area, there are communities that are quite active, others not so,” he says. “Some smaller cities or semirural areas aren’t busy if they’re not economically diverse and if that community’s industries aren’t busy.” The larger cities—Chicago, Indianapolis and St. Louis—are all strong, he says.

Strength in the nonresidential sector varies by market segment, says Max Dodson, CEO of Commercial Glass & Metal Inc. in Joplin, Mo. He has seen office construction decline, but the institutional segment has picked up, he says.

“We have several schools being built in the area—that’s our primary business right now,” Dodson says. “There are also several hospital expansions.”

Van Buskirk and Dodson back findings from the most recent Beige Book report from the Federal Reserve.

In the Fourth District out of Cleveland that includes eastern Kentucky, Ohio and western Pennsylvania, commercial construction is steady, with healthcare, transportation and manufacturing construction driving growth, according to the report. Contractors say their current backlogs show nonresidential construction should continue strong through 2008.

In the Seventh District out of Chicago, covering northern Illinois, Iowa, Michigan and southern Wisconsin, nonresidential construction so far has remained unaffected by the falling housing market. However, volatility in the financial markets has “restricted developers’ ability to obtain financing for projects,” according to the report.

Commercial construction and real estate showed positive growth in the Ninth District out of Minneapolis that covers the Dakotas, the upper peninsula of Michigan, Minnesota, Montana and western Wisconsin. Construction was up with several large projects including a 500,000-square-foot retail center in Hudson, Wis. Office, industrial and medical space vacancies also decreased in the Minneapolis-St. Paul region.

Commercial construction and real estate also remained strong in the Tenth District out of Kansas City that includes Colorado, Kansas, western Missouri, Nebraska, Oklahoma and Wyoming. “Most contacts were upbeat about future commercial activity despite some decrease in the availability of credit,” according to the report.

Read about the construction markets in the Northwest and the South in the next two editions of e-glass weekly. To read about the West, click here.

--By Katy Devlin, e-Newsletter Editor, e-glass weekly