Empty manufacturing space nationwide is approaching levels reached during the 1991 recession and new office space has been cut in half in recent years as the economic slowdown takes its toll on commercial construction.
The Federal Reserve’s Jan. 15 “beige book” survey of economic conditions pointed out a widespread overhang of commercial real estate. The survey reported major oversupply in Dallas, Chicago and San Francisco.
Still, overall construction is doing well because of record housing demand and more public spending on roads, schools and hospitals. But many contractors are expecting the first decline in a decade in 2003, according to a report by USA Today.
“Right now, there’s no need for new [commercial] buildings,” Gina Martin, an economist at Wachovia’s Economics Group, told the publication. “There’s no people to put in them. There’s no equipment to put in them.”
The economic slump has caught up with the public sector, and many states are facing budget deficits. Businesses are watching their pennies and colleges and universities are postponing building projects. Some construction material manufacturers have also reported declines in orders.
While many economists say the situation is severe, they add the economy isn’t in as bad shape as it was in the early 1990s. Several states are still spending money on construction – mostly for schools – despite deficits by floating bonds. And the residential market is expected to remain strong in 2003, though probably not at the record levels reached at the end of 2002.