In Construction, No Boom—or Bust: The industry remains optimistic about prospects for 2002, although at least one economist isn't so sure

New Mexico Business Journal, Dec, 2001 by Shawn Shepherd

IF YOU BUILD IT, THEY WILL COME. THAT may very well be the message here in New Mexico where the construction industry has been a consistent economic development force statewide. "Construction is a major portion of the economy in New Mexico," said Jim King, president of Bradbury Stamm Construction, one of the state's largest general contracting firms. "Unfortunately, New Mexico doesn't have a lot of private sector jobs and the construction industry makes up one of the largest industry sectors here--a lot of our private economy depends on construction."

The Big I and statewide road projects, Intel's plant expansion in Rio Rancho, casino and hotel construction at the Pueblos, UNM's massive renovation of the main campus student union, hospital construction and renovation, power plants coming on line, and work projected for Sandia and Los Alamos National Laboratories all lead to a very healthy construction-based economy. The breadth and depth of statewide work has been a boom in the otherwise lagging economy say the experts.

According to a recent report of FW Dodge Reports, non-residential building in New Mexico doubled in 2001 from the previous year. In June 2000 non-residential building came in at $25.1 million and in 2001 that had climbed to $58 million for the same period. Residential builders also had healthy gains, with a 25 percent jump from $51.9 million to $64 8 million. Some $659 million in contracts have been reported for 2001, compared with $568 million the previous year.

The positive outcomes of the state's construction-based economy are far-reaching. "There are 43,000 people working in construction in New Mexico, so it is a large segment of our workforce," said Jim Folkman, executive vice president for the Home Builders Association of Central New Mexico, "and as long as commercial and residential construction remains strong, that has a very positive impact on our economy, not only because it generates income for families, but also because it generates significant gross receipts taxes for municipalities."

Industry insiders are confident that the future remains bright for construction--and, as a result, the overall economy--of the state. "We feel pretty optimistic," said Don Power, president and COO of Jaynes Corporation. "There are a fair amount of large projects that are on the horizon that will come on line and take the place of those projects that are finishing up."

In non-residential construction, the Sandia Casino project, Big I exchange and Intel have been the industry leaders. The casino opened to crowds this past summer and both of the remaining projects will be concluded by next summer. But government-funded projects, including major overhauls at Sandia and Los Alamos National Laboratories, school building and renovations funded by the state, and power plants being built in Deming, Socorro and the Four Corners area, are all expected to keep construction moving forward.

"We do expect the private sector to lag a bit, but it looks like the public sector will be very strong into next year," said Bradbury Stamm's King. "There are times like these when you have to restructure things a bit. We have been heavily directed into the private sector projects like hotels, casinos and retail, and that segment of the economy is not going to be as robust. But we are used to that flexibility--the construction industry goes back and forth all of the time."

In the housing market business is also expected to continue its growth. "In Albuquerque, the one bright spot in the economy over the last few years has been the housing starts--they have been very vibrant," said Folkman. Housing starts were 4,415 through September of this year, compared to 3,638 for the same time last year, representing a nearly 21% increase. According to Home Builders Association projections, housing starts are expected to end the year at 15 percent over last year; nationwide the expectation is to see a decline of 7 to 10 percent.

While housing starts have been on the upswing in central New Mexico, the complexion of starts has changed. "The median prices have gone down and there is an increasing number of housing starts at the low end of the market for first-time home buyers," Folkman said, explaining that the financing options made available through the New Mexico Mortgage Finance Authority and Fannie Mae helped make down payments possible to a new group of buyers. "As long as the interest rates stay low and the creek doesn't rise, we expect this trend to continue," he said.

For many, the creek rising comes in the form of the economic fallout of America's national tragedy and entry into a wartime economy. "Economic issues are so complex and the events of September 11 have changed things," said Yvonne Chicoine, executive director of Associated Builders and Contractors. "I don't think anyone can begin to comprehend the implications--even the good--that will come out these events.

"The thing that has always been interesting about New Mexico is that while the rest of the country seems to go through high peaks and low valleys, we have always been far more even-keel," Chicoine said, explaining that the important role of federal dollars and the stability of budgeting cycles for related agencies is likely to be a positive for the state's construction business. "I think one needs to look at the nature of government activity that is here and there is a significant amount that is technology and defense-related, so we may benefit from a refocus of dollars," she said.