Cash flow for office spending dried up last year, as the value of new office building/renovation work completed through November 2002 was 27.9% below the total for the first 11 months of 2001. Over-the-year declines stabilized during the second half of 2002 — no worse than in the spring of last year, but really no better either. Final government figures will show that full-year 2002 spending for construction work on office buildings to be 25% to 30% below the $52 billion spent in 2001, or about $38 billion.
This reduction in spending is in direct opposition to recent years. Over the three-year-period from 1998 through 2000, annual growth in the office construction market averaged 17.6%. But then the value of new and renovated office space completed during 2001 came in 6.4% below the peak level for 2000. And the steep plunge recorded during 2002 makes it likely that spending equal to or exceeding the 2000 level won't be seen for another two or three years.
November 2002 spending gives some reason for optimism. During the month, spending was 25.8% lower than during the same month a year earlier — an improvement over the steeper losses recorded during all other months over the second half of last year. So, at worst, it's reasonable to conclude that the market is "bouncing along the bottom" of this severe cyclical downturn in office construction spending.
But there is no getting around the fact that the sector was in a sickly state as we moved through the final weeks of 2002. The annualized construction spending pace of $33.8 billion last November was a far cry from the $52 billion worth of work completed during 2001 — and that wasn't even the market's peak.
Commercial, industrial & institutional (CII) construction spending
(Billions of current dollars)
|Spending in November 2002*||Percent change from November 2001||Spending in year-to-date 2002**||Percent change from year-to-date 2001||2001 total spending||Annual percent change|
|Source: U.S. Department of Commerce; forecast (f): Reed Business Economics * seasonally adjusted annualized rate ** in billions of dollars, not inflation-adjusted
|Other private bldgs.||7.91||-11.2||7.76||-9.1||9.26||-10.4||-9.4||-6.3|
|Other public bldgs.||38.57||2.0||35.11||3.2||37.16||7.4||3.0||-5.7|