Commercial construction improvements made, despite financial worries in market

Commercial construction has experienced improvements.

Many commercial property managers could see new commercial properties on the way, as the construction situation has made some positive strides across the country in the past several months, according to CoStar Group.

Citing a report from Fitch Ratings, the outlook for commercial construction is positive, as construction demand has increased significantly. This, coupled with the fact that construction activity since the recession has been low, has helped the market improve, the news source reported. Spending on commercial building projects rose to $143.2 million, which was more than 23 percent higher during the first half of the year compared to the same point in 2011.

The federal government also passed a federal highway bill worth $105 billion, and this could help local governments create more commercial projects down the road, the news source said. Fitch warned that these projects will not start until next year, at the earliest, and public construction should only rise by 2 percent next year.

Another report, from Associated Builders and Contractors, explained that while some members of the industry are confident, many developers have dialed back their optimism. The Construction Confidence Index experienced a decline of sales expectations to 62.3 during the second quarter. During the first quarter, the figure was 68.3. Profit margins dropped to 53.5 from the previous quarter's 57.9, while staffing levels fell below 60 from the older index reading of 64.3.

The worry from developers continued through the year, despite improvement in the economic climate for the fourth consecutive year, the news source explained. Much of this is because construction spending has not shown a marked change this year.

"Nonresidential construction firms have become unnerved by the possibility of the nation falling off a fiscal cliff due to a number of tax increases and spending cuts that take effect at the end of the year," said Anirban Basu, chief economist for ABC. "This would limit private nonresidential construction, which is among the nation’s most cyclical industries."

Basu added that if economic growth begins to taper off, many in the construction industry may become more concerned about the future outlook.

However, the news source added that despite struggles in some aspects of the industry, nonresidential construction and homebuilding have both experienced jumps in employment, which could make some in the industry confident about the future situation.

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