Experts Predict Partly Sunny Forecast for State Industry

Tue April 13, 2004 - Southeast Edition
Giles Lambertson

Like their peers across the country, Florida contractors are working through an uncertain economic period. Economists are projecting growth in some segments of construction activity and shrinkage in other segments.

Florida in 2004 looks somewhat like a boomlet area, neither boom nor bust likely in its immediate future. The strongest construction activity this year might be on highways and public schools –– at least in the view of some.

“Housing and highways should hold up OK,” said Ken Simonson, chief economist of Associated General Contractors of America.

Simonson pegs much of his highway hopes to the six-year federal transportation bill that increases long-term funding. House and Senate have different spending levels in their transportation bills, each level higher than a Bush administration proposal. Yet even a compromise measure is expected to add some new money to the mix.

As for K-12 public school construction, Simonson notes that big bond issues have consistently been supported by school district patrons. The school construction market is further stabilized by rising residential property tax receipts.

That surge in tax receipts is expected to continue. One reason is that housing values continue to appreciate at a faster rate than inflation.

Simonson noted that property appreciation in Florida in 2003 averaged more than 11 percent, the 10th best jump in the country.

“Housing is still going to have another strong year,” he predicted.

Single-family construction was up 17 percent last year. While that has slowed, Simonson nevertheless predicts some expansion.

But construction of condominiums could lead the way in the residential segment. A partial listing of current condo projects in Florida include Tampa’s 260-unit, $93 million complex called The Towers of Channelside.

In Hollywood, a $115 million 38-story, 240-unit Oceans Palms complex is planned and a 338-unit twin-tower Symphony complex is going up in Fort Lauderdale.

These condominiums and other housing properties feed school systems in complementary ways. They bring in more students and add more tax base.

The Broward County Public School system that serves Fort Lauderdale, for instance, is the largest, fully-accredited school district in the UnitedStates –– and still growing.

Approximately 270,000 K-12 students are taught throughout that south Florida county on more than 200 campuses. The annual influx of students in recent years has averaged about 6,000.

Consequently, construction of new facilities is a constant focus of the school board and administration. The five-year building program on the books totals $1.3 billion, including construction of several brand new schools.

Jack Cooper, the school system’s senior project manager of construction, doesn’t see a slowdown in activity any time soon.

“I’ve been here 27 years,” he said. “It was like this when I came here and it hasn’t stopped yet.”

Neighboring Miami-Dade schools have more than a billion dollars in construction planned or contracted. Orange County has a whopping $3.3 billion planned or under way.

Highway work is the other generally reliable growth segment in Florida, though Simonson and others hedge their projections.

Forecasters of the McGraw Hill Construction publication say the engineering construction segment, which includes highway work, could decline by 15 percent.

AGC economist Simonson doesn’t go that far, but noted that “public construction will weaken.”

He cited uncertainty surrounding the federal transportation funding bill as well as scarce supply and subsequent rising cost of some types of steel.

Together, the two factors could cause public construction to “shrivel” for some months to come, Simonson said.

Activity is not noticeably shriveling at Hubbard Construction Company, one of the state’s largest highway and heavy construction firms.

“There is a lot of work here in Florida,” said Phillip Gordon, Hubbard’s vice president of construction, “pretty much across the board. We’re going to be fine.”

Gordon’s view is defensible. Of the top 50 highway projects in the Southeast as compiled by McGraw Hill Construction, 20 are in Florida. Hubbard has four of those, including interstate widening and expansion jobs in Polk and Palm Beach counties and in Orlando and Delray Beach.

“Orlando is hot,” Gordon observed, which bodes well for his Orlando-based company.

Farther north, Steven A. Hall, executive vice president of the AGC of Central Florida, expresses slightly less optimism.

“The northeast Florida area and Tampa is really in pretty good shape, relatively speaking,” Hall said. But Hall goes on to voice concern about the emerging steel supply problem.

Speaking of rolled steel used for pre-stressed concrete components, Hall said he knows that “not everyone is getting everything they are ordering.”

That shortage is beginning to be felt, he said. “The cost of steel is impacting everyone greatly.”

If there is something most observers seem to agree on, it is that private nonresidential construction in the region might have turned a welcome corner.

A U.S. Markets Construction Update by FMI Corp. notes that nationally the private nonresidential category was flat in 2003, but is expected to improve any day now.

Simonson holds a similar view.

“Private nonresidential construction has yet to benefit from the economic upswing, except to the extent that it is shrinking less rapidly than before,” he said in early March.

He looks for health care construction to expand further in Florida in 2004 and for more construction by discount chains –– and hotels.

One of the new hotels is coming to Fort Lauderdale. Starwood Hotels & Resorts Worldwide is building on the Fort Lauderdale beach a $220 million Hotel and Residences unit, which will contain 346 hotel rooms in addition to 171 luxury residences.

That is the sort of project that leads McGraw Hill Construction to predict that private nonresidential construction in Florida “will move up in 2004 with a healthy 7 percent upswing.”