More Dollars, Fewer Projects in 2009

One of the few pleasant surprises of the New Year is the volume of bidding in January. Normally a slow month for bids and contracts, January was expected to be a continuation of the dead fourth quarter of 2008, especially as more and more developers put projects on ice. Instead a couple hundred projects went out, and work began on most of the projects that were awared at the end of 2008.

That surprise aside, non-residential construction in 2009 is going to be slower, both nationally and in the region. Here in western PA, however, the numbers won’t show the slowdown because of the unusually high volume of large proejcts again. Throughout the past decade median annual contracting volume was between $2 billion and $2.5 billion. During the height of Plan B, when PNC Park, Heinz Field and the convention center were all started, the volume reached $4 billion in 2000. For the past two years contracting volume was right at $3.5 billion, and the economic woes should be expected to reduce the volume in 2009 by a billion dollars, but the volume may actually grow by more than that, even potentially topping $5 billion.

The graphic below shows 15 projects that are either starting or that will start this year. While all of the biggest projects are listed, it’s likely that there are a number of others between $20 and $50 million that aren’t on this list.

A sampling of 15 of the largest projects expected to start in 2009 in the metropolitan Pittsburgh area
A sampling of 15 of the largest projects expected to start in 2009 in the metropolitan Pittsburgh area

The total of these projects alone equals the volume for the last two years, around $3.5 billion. The disparity between the high dollar volume of big work (even though it’s a few projects the volume still requires the resources to complete $3.5 billion) and the rest of the market underscores how trying 2009 could be. With a little simple math it’s clear that even a $5 billion year will leave most of the market scrambling to compete for $1.5 billion in work.

That should make 2009 feel a lot like 2002.

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