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Construction up, just not in housing

Home construction is way down, but plenty else is going up.

By JAMES THORNER, Times Staff Writer
Published January 25, 2008

Hospital construction, like that on the new Community Hospital in Trinity, has seen gains.
	[Stephen J. Coddington | Times]

The housing slump has whacked construction employment by about 20 percent in the past year. So you would expect construction worker pay to nosedive.

You would be wrong.

In one of the many oddities in this tumultuous economy, construction of hotels, hospitals, power plants and offices is picking up much of the slack from declining home sales, said Ken Simonson, chief economist of the Associated General Contractors of America.

In a breakfast speech to area contractors Thursday in St. Petersburg, Simonson prepared his audience for another sock to the pocket: Labor costs could rise 6 percent to 7 percent this year.

"Workers who are needed to work on power plants ... and delicate hospital work ... you to have steal them from someone else and pay them more," he said.

Simonson's take on the overall climate for construction was mixed. He said the government and media have hyped the recession danger, but cautioned that financial stampedes aren't always founded on reality. "I don't think we're anywhere near a recession," Simonson said.

A greater immediate danger, he said, is that the Federal Reserve's loose money policy could fuel inflation. That's a threat to a construction industry reliant on price-sensitive materials like diesel fuel, steel and concrete. Diesel is up 85 cents per gallon in a year.

Housing's decline has been partly counterbalanced by a surge in hotel and office construction. Nationally, lodging construction was up 66 percent last year, following a 42 percent rise in 2006. Will it last? The "hotel building jag" is "headed for a sharp turnaround" this year, Simonson said.

He sees a similar slowdown in office construction. It's been on a tear both nationally and locally, but is coming up against a glut. Slowing employment will crimp demand for new offices.

Retail construction will hold steady, Simonson said, but it's nothing compared to the growth in the power and energy fields. It's not just electric power plants that need building, but oil refineries that need expanding and upgrading.

"This category has a lot of momentum," Simonson said.

As for housing construction, the big "if" on everyone's mind was whether business would turn around in 2008. Simonson predicted further hesitation from home buyers worried prices will fall further.

"You hate to be the guy who bought a house for $50,000 more than if you waited six months," he said.

Construction stats 

Nationally, construction was up in 2007 - if you know where to look

Power plant construction: Up 25 percent

Office: Up 21 percent "but ripe for a slowdown"

Hotel/lodging: Up 66 percent

Communications/cell towers: Up 20 percent

Hospitals: Up 15 percent

New home construction: Down 50 percent

Pounding out projects

Who needs houses? Some pricey and prominent nonresidential construction projects in the Tampa Bay area:

Hospital: $400-million construction of All Children's Hospital in downtown St. Petersburg

Retail: Cypress Creek Town Center, 1-milllion square feet of stores at State Road 56 and Interstate 75, Pasco County

Hotel: 171-room Hilton at Avion Park in Tampa's Westshore.

Office: 247,000-square-foot, eight-story Corporate Center IV at International Plaza in Tampa

[Last modified January 24, 2008, 23:03:07]