1. Where Is Construction Headed Globally
In 2011?
This was my answer to a very similar
question in a LinkedIn group.
Leaving politics out of it and since the world financial collapse was brought on by the slow,
thirty year bipartisan deregulation of our financial institutions: we do not see where growth
will come from in 2011. The bottom line is our industry has been changed forever by the
correction which occurred in the fall of 2008 caused by the overheated residential and
commercial construction sectors. This correction started in early 2007 with the subprime loan
crisis which first affected the housing market and the rest we are still feeling. The upside in
2011 should be that the bleeding will start to subside and the first sign of this is that housing
seems to have bottomed out: “It is not showing any signs of growth, however housing starts
have been hovering around five hundred thousand units per month for most of 2010, however
at its height in 2006 we averaged 2.3 million starts per month. “ This said there is still a
considerable amount of toxic paper out there in the office, lodging and retail sector which is
keeping the banks from lending which will lead to more bank failures in the coming year. It
really doesn’t matter because there is a huge glut of vacant commercial and retail space.
Recently the Fed stated that unemployment will likely remain above nine percent through
2011, this combined with home foreclosures and the anemic sales of new and existing homes
has greatly diminished public revenues putting most states in a monetary crisis. These state
revenue short falls will make state financed construction projects impossible to fund; the
tragedy here is that elementary, middle and high school construction makeup virtually fifty
percent of all architectural construction. Below are three graphs that I have created to
illustrate construction spending by segment in monthly moving totals compared back to 2006.

3. Foreign opportunities: Without getting specific, areas in the Pacific Rim especially China are
going to grow in varying markets: For the past ten years China has experienced an explosion in
high rise and other residential construction which has led to an increasing need to beef up
transportation and other miscellaneous infrastructure, we do expect this to continue; it is also
our feeling however that China is sitting on a financial bubble due to the drastic undervaluation
of it currency. Except for the foreign currency issue, the same can be said for India as it
continues to put a stake in the ground as the world’s new emerging economy. There is a
considerable amount of high rise residential construction, mixed with institutional and
infrastructure expansion, as its new middle class emerges. As it relates to the Middle East,
specifically Qatar, Saudi Arabia, Egypt and the Emirates; there will continue to be a growing
number of institutional, multi residential, commercial and infrastructural projects; the only
exception would be Dubai. We have all seen the news regarding the European economy; with
exception of Germany they are experiencing to some degree similar economic pressures as the
US. The growing austerity programs in the UE and Great Britain related to large domestic debt
will continue to stifle institutional construction and hamper overall economic growth. Please
free to contact me with any questions or comments.
(Written & Illustrated by Doug Bevill; Construction Economics & Strategies)
dbevill@con-econ.com
www.con-econ.com
Phone: 314-422-3177
Dated: 12/30/2010