Cement Americas provides comprehensive coverage of the North and South American cement markets from raw material extraction to delivery and tranportation to end user.
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FEATURE FORECAST 2012 either directly or indirectly, translates into higher occu- pancy and leasing rates. Combined, these factors de- termine the expected return on investment for most commercial properties. Weak economic conditions de- press expected ROIs. Only with a significant increase in jobs, will the outlook for commercial construction ac- tivity accelerate. It will take time for these conditions to heal and give way to a nonresidential construction recovery. The speed at which the healing process begins will be largely dictated by the strength in the labor market re- covery. PCA maintains the nonresidential recovery process will remain prolonged, with substantive cement volume gains materializing in 2013. In addition, the commercial real estate market is plagued with refinancing issues. Many commercial properties were refinanced during the easy credit era. This period also ran coincident with high property value assessments. Many of these properties were re- financed on five year balloon payments, which are now coming due, and based on asset values market conditions no longer support. Many commercial prop- erty owners have been successful in restructuring their debt—to some extent reducing the same threat posed by the single family mortgage market. While commercial real estate leverage is improving, it re- mains high on a historical basis. Over $1 trillion in commercial real estate debt is coming due over the next few years. The value of much of the collateral is still less than the loan balances. Finally, prospective asset appreciation adds to po- tential commercial property owners overall expected ROI. Unfortunately, the prospect of sustained low oc- cupancy and leasing rates has prompted a decline in commercial real estate asset values compared to peak levels related to the housing boom. PCA expects com- mercial property values will continue to decline through 2011. The asset price decline further hinders an im- provement in the return on investment. Commercial building will grow 8 percent in 2012, ac- cording to the McGraw-Hill Construction outlook. Ware- houses and hotels will see the largest percentage increases, but improvement for offices and stores will be modest. The institutional building market will slip an additional 2 percent in 2012, after falling 15 percent in 2011. The tough fiscal environment for states and lo- calities will continue to dampen school construction, and the uncertain economic environment will limit growth in healthcare facilities. Manufacturing buildings will increase 4 percent, following the 35 percent gain in 2011, says McGraw-Hill Construction, as the low value of the U.S. dollar continues to support export growth. ARRA, HIGHWAY BILL, STATE DOLLARS MAKE FOR UNCERTAIN PUBLIC WORKS Substantial risk surrounds PCA's forward assessment regarding highway construction. At first glance, high- way spending could be facing a double-digit decline during 2012. American Recovery and Reinvest- ment Act (ARRA) dollars will decline significantly. An extension of the high- way bill at constant nom- inal levels suggests fewer real dollar spending after inflation is considered. Finally, slower job cre- ation implies a prolonged period of state govern- ments' fiscal duress. While ARRA spending is expected to decline in 2012, it also distorted the trends and assump- tions made regarding The privately funded DePaul Theater School project is currently being erected in Chicago. Recovery in this nonresidential market is expected to be prolonged, with substantive gains materializing in 2013. PHOTO: Washington Department of Transporation 14 state highway construc- tion spending. Once the interplay between ARRA and state spending are assessed, it is likely that ARRA had much less of a stimulatory impact than CEMENT AMERICAS • November/December 2011 • www.cementamericas.com