National data suggests that, overall, growth is occurring in the construction industry, particularly in states such as California. However, there are three negative trends in the construction industry that are holding back growth and preventing an even more robust recovery.
Ken Simonson, the chief economist for the Associated General Contractors, a leading construction industry trade organization, identified these three negative trends:
- Government spending continues to be down. Government spending on infrastructure projects and new construction continues to be flat. Areas such as highway construction, the building of new schools and public office buildings, and other types of government spending aren’t being infused with cash or boosted by increased spending. This apparent wariness in the government sector is being felt by contractors who specialize in areas such as bridge and highway construction, schools and government facilities.
- Consumers are changing buying habits. Simonson observed that consumers are changing the way they shop and purchase, with a significant reduction in commercial activity in shopping malls and so-called “big box stores” that once accounted for so much retail trade. New construction on these types of larger retailers is shrinking, and current retail construction is focused more on renovating older stores and retail facilities, or on putting retail stores on the first floor of multi-use facilities.
- Use of office space is shrinking. Suburban office parks and other office facilities are seeing a significant number of vacancies in their facilities. Occupancy rates of office buildings are about a third less than they were five years ago. New construction on office and administrative facilities has decreased substantially. Much of the construction activity in these areas is in renovation to improve floor plans or to increase the energy efficiency of existing office spaces.
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