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home news index education construction slips lower

Education Construction Slips Lower

August 26, 2008 - Jim Haughey

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Jim Haughey

The subpar economy and the recent surge in construction materials cost are progressively depressing education construction spending. The inflation adjusted value of education construction spending has dropped 3-4% since last fall. Above budget costs are forcing some projects to be scaled back or delayed. This will continue through 2008. School construction is being restrained by the year long drop in the purchasing power of state and local government tax receipts. This restraint will worsen for most of next year and in early 2009.

Higher education construction spending is 10.8% above a year ago, spending for museums, libraries and other cultural facilities is up 7.8% and K-12 construction spending is up 0.9% In the K-12 market, elementary school construction is 8.8% above a year ago. High school construction is 5.3% higher than a year ago. But middle school construction is 10.7% below a year ago because the enrollment bulge has now moved into the 11th grade. Private k-12 construction is below the record level early in 2007 but remains well above the 2005-06 level. In the higher education market, private colleges are increasing construction spending faster than public colleges, suffering from reduced state budget appropriations. Development of residence halls and instruction buildings is outpacing special purpose and administrative buildings because enrollment continues to rise faster than in the K-12 system.

Year to date education construction starts are off 38% in Florida and 30% in Arizona in two of the states hardest hit by the current domestic recession. But so far the recession has not had the same impact in California (-2%) and Nevada (+64%) where borrowing has kept projects from being cancelled.

Education construction spending is expected to increase 8% by the end of 2009 but spending gains will not cover increased project costs until at least early next year.

Source: Historical data — Census Bureau
Forecast — Reed Construction Data

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