US nonresidential building seen down 20 pct in '10

Wed Jul 14, 2010 9:23am EDT

* Nonresidential construction spending seen down 20.3 pct

* Hotels seen down 43.3 pct, office category down 29.1 pct

* Survey cites oversupply, weak demand, tight credit

NEW YORK, July 14 (Reuters) - Spending on U.S. nonresidential construction is likely to fall more than 20 percent this year before recovering slightly in 2011, according to a semiannual survey by an architects' trade group.

The survey's consensus forecast calls for a 20.3 percent decline in construction spending, according to the American Institute of Architects.

The AIA cites an oversupply of nonresidential facilities in most construction categories, weak demand for space, continuing declines in commercial property values, and real estate lenders' reluctance to provide credit.

Recovery of nonresidential construction activity typically lags a recovery in the wider economy, especially an employment revival, which drives demand for office and retail space.

Conditions have deteriorated over the past year, even as the wider U.S. economy has begun to rebound from recession. For 2010, survey respondents had forecast a 13.4 percent drop in January and only a 12 percent decline a year ago.

Construction spending on hotels will drop more than 43 percent this year, construction of office buildings will decline almost 30 percent, and retail and industrial categories will be down more than 20 percent, the AIA said.

It forecast smaller declines for institutional categories like amusement space, educational and religious facilities, and health care buildings.

BETTER 2011

The AIA forecast single-digit gains in most categories in 2011, with an overall 3.1 percent increase in nonresidential construction spending. That is a slightly improved outlook from the prior survey in January.

The survey is based on forecasts by McGraw Hill Construction, Global Insight, Moody's economy.com, and others.

The AIA's monthly index of billings by architectural firms has indicated contraction since January 2008. It most recently dipped in May, after three months of gains, dashing hopes that a recovery was gaining traction. [ID:nN22237544]

Most diversified industrial companies garner at least some revenue from the nonresidential sector, selling either machinery used in construction or the guts of a building: elevators, electrical and lighting systems, heating and cooling and security networks, for example.

A partial list includes Honeywell International Inc (HON.N), Tyco International Ltd (TYC.N), Ingersoll-Rand Plc (IR.N), Johnson Controls Inc (JCI.N), Caterpillar Inc (CAT.N), Deere & Co (DE.N), Terex Corp (TEX.N), Emerson Electric Co (EMR.N), Parker Hannifin Corp (PH.N), Manitowoc Co (MTW.N), Oshkosh Corp (OSK.N), ITT Corp (ITT.N) and Eaton Corp (ETN.N). (Reporting by Nick Zieminski; Editing by Lisa Von Ahn)

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