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Utah construction outlook 2010: Bleak

(The Enterprise) Despite many large construction projects looming on the horizon, industry analysts are predicting another down year for Utah’s construction industry in 2010.

In 2009, nonresidential construction in Utah fell almost 37 percent, the biggest single-year decline since the Great Depression. Commercial, permit-authorized construction fell to $1.2 billion from $1.9 billion in 2008, and will likely drop further in 2010.

James Wood, director of the Bureau of Economic and Business Research (BEBR) predicts Utah construction will most likely have two more weak years. Commercial construction will total less than $1 billion in 2010 and 2011 before beginning to recover in 2012.

Construction workers, who make up 6 percent of Utah’s workforce, have experienced massive layoffs as companies have been forced to make cuts due to declining revenue and increased bid competition.

In 2007, Utah’s construction industry had 103,500 jobs, but lost over 12 percent in 2008. According to BEBR, only two years since World War II have had steeper declines in construction jobs: 1967 when jobs dropped by 13 percent, and 1987, when job losses reached 17 percent. The forecast for 2010 anticipates moderation in job losses but still a 6.9 percent drop and the loss of another 4,800 construction jobs.

Ken Shulsen, president of the Associated Builders and Contractors of Utah, said 2009 was the hardest in his five years at ABC Utah. “The big-market has gone completely crazy, the amount of money companies are willing to lose to buy jobs… We see a lot of companies come in and undercut the competition by 10 and 15 percent. We also see companies coming from out of state, because Utah’s market is still better than most places’,” he says.

Shulsen predicts that construction will continue to slow for an additional 12 to 18 months, and says stimulus-funded government projects may be the only profitable undertaking. The Utah Transit Authority has plans for numerous developments in 2010 including the airport TRAX line and the one million square foot National Security Agency data center.

Glenn Beckstead, chief estimator at MHTN Architects, predicts that the state will cut its construction budget to $150 million in 2010. MHTN began laying off employees last Jun and is now down to 70 workers, from a previous 120.

Ultimately, predicting Utah’s construction climate for 2010 precisely would require daily adjustments and evaluations as the economic factors are in constant flux. Unemployment, though, may play the biggest role in determining when Utah’s construction industry will become stable again.

“You can’t build a building if you don’t have anyone to work in it,” Wood says.