Jones Lang LaSalle


Commercial Construction to Pick Up As Residential Declines
March 01, 2006
By Michael Fickes, Mid-Atlantic Correspondent

Accelerating commercial construction will more than make up for economic losses caused by a declining residential construction industry during 2006, according to an economist with a major construction association.

"We'll see big box, discount and warehouse store construction expand at a great rate this year," said Ken Simonson, chief economist with the Washington, D.C.-based Associated General Contractors of America (AGC), during a teleconference yesterday afternoon. "Last year, the second biggest growth category in private nonresidential construction was manufacturing. Given high capacity utilization rates, I'm optimistic about factory construction for the rest of 2006."
Simonson also predicted a strong 2006 for hospital and healthcare construction, the warehouse and distribution category and for the hotel and resort market.

But office construction will likely lag behind other commercial categories. "Many say that vacancy rates have declined and that office will finally rebound," Simonson said. "But the national average vacancy rate is still high. And we continue to hear announcements from large companies that are merging or downsizing. Office staffs take up part of these job cuts."

Employment trends also don't favor office construction. Out of 2 million jobs created in 2006, Simonson said that not enough were created in the office sector. "In construction alone, we added 345,000 jobs last year," he said. "Construction and other positions like retail sales did much better (in job creation) than traditional office work."