AIA Says Non Residential Construction Will Fall

Washington, DC, Jan. 15, 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, the American Institute of Architects predicted on Wednesday.

The AIA 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.

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