Madison Market

Drop in Starts Seen as
No Cause for Worry

by Elaine Schmidt

The Madison, Wis., metropolitan area saw a 31 percent dip in construction starts in 2006 compared with the previous year-yet work is booming.

advertisement

"We had a record-breaking year in 2005 and broke that in 2006,"says Jeff Tubbs, director of business development for Madison-based contractor J.H. Findorff & Son Inc. "By the looks of the backlog, 2007 will be bigger and better than 2006."

The data reflects when large, multiyear projects have gotten under way, rather than indicating a major slowdown. He points to several large projects that started in 2005 and are still under construction as well as an enormous upcoming project as evidence of market stability.

Bob Barker, executive vice president of the Madison-based Associated General Contractors of Wisconsin, agrees.

"I don't think those 2006 numbers are reflective of the market," he says. "I think they are reflective of timing issues."

Data from McGraw-Hill Construction, publisher of Midwest Construction, show starts in 2006 were $1.3 billion, down 31% from 2005's $1.87 billion. Both commercial ($540 million, down 33%) and residential ($601 million, down 34%) suffered declines.

As in many parts of the country, infrastructure was the lone bright spot, up 2% to $158 million, according to the data. Increases were seen in streets and highways (up 36%, to $69 million); bridges (up 27%, to $15 million) and dams and reservoirs (up 197%, to $3.4 million)

Health Care Still Strong

Despite a 68% drop in hospital starts from 2005 to 2006, Tubbs says there is a wealth of hospital construction going on in the metropolitan area.

Three, large hospital projects started in 2005: American Family Children's Hospital, a roughly $75 million expansion; St. Marys Hospital, $174 million expansion over several years; and Meriter Hospital, 108,000-sq-ft expansion.

Continued strength in hospital construction is expected. While there are hospitals serving small communities that are located some distance from Madison, the city's hospitals serve as a "hub of expertise" for difficult or specialty care, Barker says.

He also points out that the Wisconsin Institute for Discovery-project funded in equal parts by the state, the University of Wisconsin and a private donor-is on the horizon and will likely break ground in 2008. The interdisciplinary project, estimated to cost $375 million, would bring together biology, bioinformatics, computer science, engineering and nanotechnology.

Slated to cover an entire city block on the UW campus, it will create space for government- and privately-funded research. It will be a joint venture of Findorff and Minneapolis-based M.A. Mortenson Co. and is slated for completion in August 2010.

Housing is an area where a dip in work is seen: Multiunit construction was down 46%, to $81 million, and single-family housing is mirroring the rest of the nation, experiencing a 31% decline, to $483 million.

"The condo market has been strong, but we are seeing it soften a bit because of the inventory on the market," Tubbs adds.

Outlying Areas' Activity

Barker says that it is important to look at the greater metropolitan area when evaluating the market.

"The trend right now is to build as little as possible in Madison," he says, excluding the university. "The growth in the Madison area is not in Madison itself; it's in the surrounding communities."

The outlying communities are seeing a number of school construction projects, several of which may figure into the 2006 starts.

"Monona Grove High School just bid out a $20 million project," Barker says, "Mount Horeb is going out for a referendum on a school project, and Sun Prairie is, too.

"If you're looking at the metropolitan area, not just Madison, we still have a strong market with lots of opportunities out there."

SIDEBAR

Madison Starts

Both commercial and residential construction suffered major declines in construction starts in 2006 over 2005.

Madison Starts (in millions)
	2005	2006	% Ch. 06/05
Commercial	$806	$540	-33
Residential	$911	$601	-34
Infrastructure	$155	$158	+2
Total Construction	$1,872	$1,299	-31
Source: McGraw-Hill Construction

Click here for next Feature Story >>