Contractors plan for a mixed outlook in 2002

From the contractor's perspective, the construction outlook for 2002 is mixed, with the expected timing and strength of economic recovery varying by region and industry segment. According to Ken Simonson, chief economist for the Washington, D.C.-based Associated General Contractors of America, while airline traveler-dependent hotels continue to suffer, destinations within driving distance of large populations, such as New England and Mid-Atlantic coastal and mountain resorts, are seeing an upturn that will lead to selective additional construction.

The industrial sector will decline, but import warehouse facilities may show growth as businesses expand facilities to ensure the availability of just-in-time parts and supplies, Simonson says.

Many construction executives foresaw the economic slowdown and have been preparing for a softening market, says Michael J. Meagher, vice president of marketing for James McHugh Construction Co., Chicago. In the Chicago area, for instance, Meagher says contractors had already begun adapting to the reality that private-sector work was tapering off. "Savvy contractors will place a new emphasis on public-sector projects, renovation and renewing their commitments to existing clients in a buyers' market," he adds.

Simonson and Meagher expect most cost increases to ease and labor shortages to subside. However, rapidly rising insurance and bond premiums continue to be an industry issue.

Cost comparisons per square foot in select metro markets