Commercial Construction Slowed by Recession, Housing Decline Ends in 3rd Quarter

The effects of the global recession have gripped the non-residential construction market in western PA as the fourth quarter of 2009 begins. Contracting during the first three quarters of the year was down 26.6% from last year. Non-residential construction during January-September was $1.98 billion, down from $2.7 billion during the same period in 2008. “The pace of bidding was about normal for late summer but the average size of the opportunity was much lower,” says Burd. “The pipeline of projects being proposed is improving, but the competitive pressure on contractors to build backlogs is showing in bids. The tight market will continue through at least the first half of 2010”

Reduced global demand has dampened the plans for almost all of the big projects slated to start in 2009, and profit pressures on corporations, combined with poorer results from the institutional sector has limited capital expenditures across the board.

Single family housing starts fell more than 32.3% compared to last year during the nine months of 2009, but that volume represents an improvement over mid-year levels. “While there was probably some goose to the market from the $8,000 tax credit, most of the improvement came in September, which would be too late for most buyers to start and close on a home in time,” said Jeff Burd, President of Tall Timber Group. “I expect that the decline will continue to narrow as the next six months proceeds, both because the October to April period last year was so slow and because demand is recovering.” Burd cited reports from the annual Builders Association of Metropolitan Pittsburgh (BAMP) Festival of Homes, held in late September, of higher than average traffic as reinforcement to anecdotal evidence of an uptick from individual realtors. “There is still a long way to go before we see a return to the normal pace of home construction, however,” cautioned Burd.

During the January through September period 1,090 permits were issued for single-family detached units, down from 1,609 last year. Attached units also declined, with 807 units started compared to 1,056 during 2008. The overall housing construction market was down 28.8%.

Tall Timber Group, based in Ross Township, is a research and consulting firm for businesses marketing in the construction industry. Founded in 2000 Tall Timber is also the publisher of BreakingGround magazine. The totals listed below represent the number of new housing units for which building permits were issued, excluding mobile homes and elderly care complexes. The top areas were:

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