2008 Construction Outlook for the Southeast

Forecast for Alabama, Florida, Georgia, and Middle and Eastern Tennessee 2008

Steve Hudson -- Associated Construction Publications, 12/20/2007

How’s the outlook for the southeast?

Last year we noted that “it all starts with homebuilding.” This time last year the outlook for home construction was generally doing well or, at worst, starting to cool in some areas. But by late 2007 “cool” had moved closer to “cold” in some areas. In parts of Florida and in areas such as Atlanta, the housing market is very slow as we enter 2008, and that means greatly diminished demand for related construction.

But don’t let the news from the home front get you down. In some areas and some market segments, 2008 could turn out to be a surprisingly good year. 

Consider central Tennessee. In Nashville, condo construction is booming and undertakings such as $250-million Cumberland River residential marina projects (not to mention a new $450-million convention center) are in the news. Chattanooga is doing very well, too, with what one observer describes as “a lot of building going on.”

Things look good in Alabama, where contractors are coming off the two best years in recent memory with expectations for more of the same in 2008. Projects such as the new $3.7-billion ThyssenKrupp steel mill being constructed in Mobile County should ultimately fuel construction not only of homes but of related construction as well. This undertaking is already prompting projects such as port expansion, and additional infrastructure construction in the project area is a virtual certainty. To the north, in Jefferson County (Birmingham), more than a billion dollars in school bonds should provide a strong financial foundation for school construction for some time to come. Medical center construction remains strong in Birmingham, too, and there’s even talk of a new  domed stadium.

And in Georgia? There’s no doubt that homebuilding is off in Atlanta, but commercial construction remains strong. Additionally, the feared slowdown in office construction has as yet failed to materialize in any significant way – though some note that commercial construction tends to lag residential by 12 to 18 months and advise continued caution. But large urban projects continue to draw attention – and on the public works side, Atlanta’s Hartsfield-Jackson is currently in the fifth year of a 10-year, $5.4-billion-plus capital improvement project (the largest public works project in the history of the state of Georgia). Possible port-related projects in Savannah further brighten the picture.

In many areas of the southeast, utility construction is considered to be a good indicator of what’s going on in the rest of the construction industry. Consider parts of Georgia, where utility work in residential developments has slowed dramatically but where opportunities abound in other market segments for contractors who are prepared to deal with changing market conditions. In Florida, too, most agree that contractors will need to consider projects they might not have looked at before. Diversification will be the key. There should be projects – but there will likely be plenty of bidders too.

Across the region, highway construction generally looks fair to good for 2008. In Alabama, highway contractors are looking for perhaps 300 projects to be let in the new year – about 50 more projects than were let in 2007. In Florida, where gas tax revenues are down and where transportation funding has taken some hits, the outlook has been described as “steady, but not as good as we’ve seen the last few years.” In Georgia, despite funding concerns in some areas, the highway picture is generally bright. And Tennessee continues to draw attention with projects such Knoxville’s SmartFIX40 project, where Phase III of that project (which will involve closing of a stretch of I-40 for more than a year) is set to begin in 2008. But throughout the region, highway funding continues to be a concern. As one observer put it, “Funding levels are not keeping pace with our transportation needs.”

Region-wide, a major concern continues to be labor. At least one observer has hinted that inadequate labor supplies may even prompt project developers to look elsewhere. Exactly where that labor-rich “elsewhere” might be remains uncertain, so most don’t worry too much about losing projects to the states next door. But the need to address labor issues is crystal clear – and trade groups across the region are aggressively addressing the issue to ensure a continued bright future for the region’s construction industry.

In light of the recent drought, others express concerns over impacts in some areas stemming from an inadequate water supply. Some feel this may have a chilling effect on permitting of new projects, and many expect the drought to prompt discussion of a variety of water-related projects.