Nonresidential Construction Seen Falling 11% in 2009

Spending on U.S. nonresidential construction projects will fall both this year and next as builders delay or cancel plans for hotels, office buildings and retail facilities, an architects' group predicted Wednesday.

Construction worker in New York City.
Oliver Quillia for
Construction worker in New York City.

The American Institute of Architects sees such construction activity falling 11 percent this year and another 5 percent in 2010, it said in its semiannual industry forecast. The group cited falling company profits and the lack of credit to finance projects.

Spending on hotel construction is expected to decline by more than 20 percent this year and another 12 percent next year. Construction of retail, office and industrial facilities is seen falling by double digits this year, with the rate of decline slowing in 2010, the AIA said.

"This is not expected to turn around anytime soon, and it's likely to get worse before it gets better," AIA Chief Economist Kermit Baker said in a statement.

Institutional categories, such as churches, schools and healthcare facilities, are forecast to post smaller declines this year.

Past recessions suggest significant declines ahead for the construction industry, the AIA said. Activity fell by almost 28 percent in the 1980s before growth resumed, and by 31 percent in the early 1990s recession. The downturn earlier this decade was milder, with activity falling 25 percent.

Companies that sell to the nonresidential construction market include diversified manufacturer Honeywell International, lighting maker Acuity Brands and electrical components maker Thomas & Betts, as well as heating and cooling systems makers Ingersoll-Rand and Johnson Controls.

Caterpillar, Terex, Manitowoc and Illinois Tool Works, among others, are also exposed to the sector.