As the Southwest Washington Contractors Association enters its 63rd year of service in Southwest Washington, like most of our members, we are tightening our budgetary belt and looking forward to brighter economic times.
Unfortunately, looking at leading indicators for builders in the commercial real estate sector, we believe more patience will be required before we can expect more prosperous times.
I was recently asked if the federal stimulus package was helping our industry through this economic recession. While a majority of the jobs currently posted in the SWCA plan center in Vancouver involve public sector projects receiving funds through the federal stimulus package passed by Congress last year, I would estimate that very few of those projects can be completely attributed to the stimulus measure.
To get more perspective on this question, I contacted some public works directors who confirmed that many public sector projects under construction or in the bid phase were already funded and scheduled for construction, regardless of whether or not the stimulus funds were available.
However, some public agencies were able to apply stimulus to projects already in the pipeline, thereby freeing up local funds in their troubled budgets. But it is worth noting that federal regulations accompanying federal funding actually increased the cost of public project compared to how they would have been bid using local standards and specifications. In one example, state and local standards covering wages call for $20 per hour, while federally-funded projects require a rate closer to $40 an hour for the same labor.
This is a great wage rate for local workers, but such a large increase in compensation works contrary to offset the extreme unemployment numbers we are experiencing here in Southwest Washington.
If we are looking for an increase in projects that can be directly or wholly attributed to the stimulus package, it most likely will not be realized until late 2010 or early 2011.
As for private sector commercial projects – currently constituting the minority portion of the projects currently listed through the SWCA Plan Center – the impact of stimulus funds is largely absent. However, the Troubled Asset Relief Program (TARP), passed in 2008 to shore up and prevent a possible collapse of our lending institutions, is perhaps the only reason we have any privately-funded projects at all.
Many of our members believe we have yet to see the bottom of the commercial market, with some speculating that we may not see the end of declines until late 2010. While TARP may be attributed to many current and pending private sector projects, many more are still unable to receive funding due to tighter lending practices and economic uncertainty.
However, with uncertainty comes opportunity. With many investors unwilling to move forward with projects due to a lack of market confidence, there are just as many investors looking to capitalize on a competitive construction market that has contractors working with slim profit margins in an attempt to survive the times.
63 years of service brings 63 years of experience. Our association's roster of veteran contractors and associates looks forward to serving the Southwest Washington business community today, and in the years to come.
Barnett is the president of the Southwest Washington Contractors Association in Vancouver.
