Builders expect downturn to last into 2011 and beyond

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More than two-thirds of the 369 contractors, equipment distributors and industry service suppliers who answered a quarterly e-mail survey said they expect the economic downturn for the U.S. construction industry to last until the third quarter of 2011 or beyond, Wells Fargo Equipment Finance reported this week.

Regarding the level of construction activity in their local area, 29 percent said it was “much higher” or “somewhat higher;” 32 percent said “about the same;” and 39 percent “somewhat less” or “much less.” As to how effective the American Recovery and Reinvestment Act had been at preserving or creating construction jobs in the respondent’s area, 28 percent rated the act “very effective” or “somewhat effective,” 47 percent said it “has neither helped nor hurt,” 11 percent said there was a negative effect, and 14 percent didn’t know.

The latest Architects’ Architecture Billings Index also underscored the tenacity and duration of the recession.

As of July, the ABI was 47.9 (any reading below 50 indicates a market contraction). While that was up from June’s 46 reading, the index has remained below healthy levels since January 2008.

“We continue to receive a mixed bag of feedback on the condition of the design market, from improving to flat to being paralyzed by uncertainty,” said AIA Chief Economist Kermit Baker.

Colorado appears to be following the national trends.

JE Dunn Executive Vice President for Colorado Springs Kevin O’Gara said that a few of his colleagues in heavy and commercial construction have benefited from ARRA funding for public projects, but most have seen significant drops in revenues.

“I don’t want to be doom and gloom, but we were off peak revenues by 15 percent last year and we’ll see another 15 percent drop this year. It’s still going to be at least a year. (This recession) is a big bus to turn around,” he said.

The Associated General Contractors of America’s Colorado Chapter also reports a statewide lull in activity that tracks closely with the ABI.

AGC Colorado Executive Director Michael Gifford said construction employment in the state today is at the same level as it was in February 1996. In the past year alone, the state’s contractors, construction equipment and materials suppliers lost more than 15,000 jobs.

“I would agree with that (AIA) assessment, though I think Colorado won’t see a turnaround until first quarter 2011,” he said, adding that his association’s members are “hunkering down for a long haul.”

Ballot issues a hot topic

Those sobering numbers, however, could be worse in Colorado if ballot issues 60, 61 and 101 would pass in November, according to those in construction-related fields.

Even the largest contractors say the resulting inability of public jurisdictions to borrow money for public improvements or to issue bonds in support of roads, schools, and infrastructure has far-reaching implications. Architects, engineers and construction companies — and the suppliers and manufacturers who support them — would have to rely strictly on the private sector for work.

Voter approval for any or all of the initiatives would also mean additional layoffs and business closings.

That’s because the state’s contractors and their subcontractors say they have survived the recession thanks in large part to road and infrastructure projects funded through the American Reinvestment and Recovery Act — or because of public jobs already in the construction pipeline through 2009.

G.E. Johnson Construction Co. CEO Jim Johnson and DLR Group principal architect Ed Bledowski both admit they’re worried.

“It’s already tough out there, and it could be even worse in Colorado — especially if they (ballot issues) pass as that form of financing is used for state, county, university construction projects,” he said.

Bledowski said his company’s business saw revenues fall in 2010 by 25 percent from the peak highs of 2009.

“We’re projecting they’ll fall another 25 percent through 2011,” he said, adding that even without the additional blow that passage of 60, 61 and 101 would deliver it will take three to five years before business would get back to normal.

New jobs

A few new construction jobs have been awarded, brightening the outlook for at least two local companies.

Gunnison County has awarded GE Johnson a contract for construction management and general contracting for its county jail and public works building. The 38,000-square-foot jail will include 96 beds, and intake/release and associated support services. The 40,000-square-foot public works building will include a vehicle maintenance facility and administration offices.

JE Dunn’s O’Gara says his company was not only fortunate to win several Fort Carson construction projects, but to be general contractor for a multi-million dollar renewable energy facility in Golden.

Contact Becky Hurley at (719) 329-5235 or email her at Friend her on Facebook.