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Construction braces for a bad year

Industry in Colorado looks to federal economic stimulus for help in '09

By James Paton, Rocky Mountain News (Contact)

Published January 1, 2009 at 8:05 p.m.

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Several sectors of the Colorado economy are struggling and bracing for a tough 2009, but none is in worse shape than construction.

Consider the businesses that pave the state's roads and highways as one example. They expect rising job cuts and another 20 percent decline in the volume of work next year, according to Tom Peterson of the Colorado Asphalt Pavement Association.

"The outlook for 2009 is not good," Peterson said, adding that economic conditions during the past year were already difficult. "The only silver lining could be the federal economic stimulus we're anticipating."

Gov. Bill Ritter recently asked President-elect Barack Obama for help in paying for roughly $1.4 billion of transportation projects. Although the federal money "would be tremendous and would put people back to work, it would not be a cure- all," Peterson said.

At the local level, Denver Mayor John Hickenlooper has unveiled plans to speed up the design and construction of scores of city projects, an effort that could help spur the beleaguered sector.

The broad construction industry has struggled in recent months because of a weakening economy and a credit crisis, and the pain is likely to persist.

After an expected drop of more than 4 percent in 2008, construction employment across the state could fall by another 7 percent in 2009, according to a forecast by the University of Colorado's Leeds School of Business.

That's a loss of more than 18,000 construction jobs over a two-year period.

"It's a pretty dour outlook," said Mike Rinner, executive vice president of the Genesis Group, who was part of the group that made the projections.

Home building, in the midst of a sharp decline, is dragging the industry down. In response to the housing and credit woes, Village Homes filed for Chapter 11 bankruptcy protection, McStain Neighborhoods closed its Louisville headquarters and MDC Holdings, parent of Richmond American Homes, cut its work force.

"People are worried about their jobs, and what has happened to the rest of the country is happening here," Rinner said. "Companies are having trouble financing new growth opportunities, and that has an impact on outlook and expectations, and to some degree Coloradans are overleveraged and carrying too much debt."

Still, observers noted that housing prices did not appreciate as fast as they did in other parts of the country during the boom and, as a result, the state is paying less of a price on the way down.

The downturn "won't be as long nor as severe as in other parts of the country, and I think by 2010 Colorado will see a slow improvement in the all-important housing sector," said Penn Pfiffner, a consultant who also worked on the Leeds report.

It is unclear whether a federal stimulus would provide a "short-term boost or a sustainable boost" that could create lasting jobs, according to Rinner. "We don't know what it will look like," he said.

Pfiffner, also a senior fellow at the free-market Independence Institute, said he believes those government efforts to spark the economy "tend to be too late. It doesn't mean the money arrives in February and everyone is busy in March. It's a slow process."

Ken Burns, vice president of engineering consulting firm PBS&J, said money from Washington would clearly help, but he said his company and others are pushing the state for a long-term funding solution. PBS&J advises the Colorado Department of Transportation, whose budget for roads and highways is decreasing.

"We're seeing a certain slowdown," he said. "Projects are being scaled back or delayed."

There are bright spots, including new school construction projects in the Denver region, which will limit the damage.

But adding to the sector's problems, Colorado in 2009 lacks a "cornerstone" project - something on par with Denver International Airport or E-470, according to the CU report. The forecast also cited declining budgets and delayed projects such as the Tabor II office tower and the 999 17th Street development.

patonj@RockyMountainNews.com or 303-954-2544

State of building in Colorado

* Estimated drop in construction employment, 2008 4.2 percent

* Estimated drop in construction employment, 2009 7.0 percent

* Estimated value of residential construction projects, 2008 $4.25 billion

* Predicted value of residential construction projects, 2009 $3.65 billion

Comments

  • January 2, 2009

    4:17 p.m.

    Suggest removal

    WarrenJimmyBuffett writes:

    Fewer jobs. Bad economy for the foreseeable future. Falling demand and falling prices will make homes a bad investment for awhile. Buy now, lose money.

  • January 5, 2009

    6:09 a.m.

    Suggest removal

    DakotaPlainsman writes:

    Too much new building and not taking care of what's here. The elevated portion of I-70 is about to collapse. That would make a great "corner-stone" project. But, it would not be as flashy as T-REX, 470, or DIA. So it will probably get a very expensive band-aid rather than real repair.