Construction Rebound Predicted by 2004

DETROIT-Building activity will rebound in late 2003 and into 2004, says Douglas Maibach, vice president of the construction and development firm Barton Malow Co. of Southfield. The incoming chairman of the Associated General Contractors, Greater Detroit Chapter, tells the Economic Club of Detroit that like the economy, construction in regional Detroit stalled in 2002 with the cancellation of some projects and delays of others.

“Critical issues such as the threat of terrorism, prospects of war, consumer confidence and the negative economic performance on Wall Street have had an adverse affect,” Maibach says.

He says the expectation is construction activity in the first part of 2003 will be down slightly, and then start rebounding.

Maibach says construction in the Detroit region, with its manufacturing focus, was hit hard this year by the caution taken by the major automotive, Tier One and other manufacturers in committing to new construction projects.

“Today we are seeing renewed interest on the part of owners to building new structures and renovate existing ones in response to customer demands,” Maibach says.

However, he adds construction activity is going to move at a cautious pace until it begins to pick up.

“A potential jump start to our market is the additional facility and infrastructure improvements needed to support the Super Bowl coming to the Motor City in 2006,” Maibach says.

Other projects that will bring changes to the Detroit area, including the new Federal Reserve Bank Building, the historic hotel projects such as the Statler and Book-Cadillac, the three casino expansions, improvements to Detroit Metropolitan Airport, the $2-billion Bloomfield Park project in Pontiac and possibly even a new arena for the Red Wings and expansion of Cobo Hall.

“We must still hope that most, if not all of these anticipated projects proceed in the near future,” Maibach says.

The various markets have potential, the vice president says.

Detroit Public Schools are in the middle of a $1.5-billion building and renovation project, Maibach says, and the University of Michigan has about$300 million in activity planned.

In the manufacturing market, Ford, General Motors, Daimler Chrysler and Mazda all have either committed to new projects, have them under consideration or underway, Maibach says.

Permit levels for multifamily projects, especially senior housing, are also expected to hold stead in 2003, he says.”The multi-tenant office market is definitely down as evidenced by the “For Lease” signs seen along our major highways. Vacancy rates are up and existing space in office buildings throughout the region is plentiful. Certain areas, like Troy, have been hard hit by poor performance in the automotive and automotive supplier industry,” Maibach says. “So while you won’t be seeing any new high rise office towers under construction anytime soon, you will continue to see numerous two- and three-story buildings being erected in cities throughout the region–more likely constructed for a specific tenant with specific needs.”

He said there isn’t much construction expected on the retail front, though stores are opening up finally in Downtown Detroit.

Overall, the construction industry will remain, at best, steady for 2003, Maibach says. “But as we say, the project isn’t “real” until that first shovel hits the ground,” he says.