Hawaii construction sector: slack, but improving

HONOLULU (HawaiiNewsNow) – It's been years since Hawaii residents joked that the construction crane was the state bird, but a new forecast suggests the bottom of the construction slump has passed.

"Construction has yet to turn the corner in Hawaii, but a pickup is now more clearly in sight," says a report from UHERO, the University of Hawaii Economic Research Organization.

The report predicts a modest increase in Hawaii construction employees, from 28,500 in 2011 to a little above 29,000 in 2012 and 36,000 by 2015.

Why only a modest increase?

"Job markets are ice cold on the neighbor islands and tepid on Oahu…  resorts are still building back occupancy and yields lost during the recession. No government seems in a particular hurry to ramp up infrastructure investment," writes Paul Brewbaker, who worked on the forecast. "Post-crisis constraints on the banking system are inhibiting lending… banks are holding on to safe assets, money that otherwise would have been lent."

The Friday forecast says the value of real non-residential building permits will go up more than 40 percent this year, to more than $1.6 billion. UHERO bases this in part on a number of high-rise condo projects already announced by their developers.

UHERO, headed by economists Carl Bonham and Byron Gangnes, said 2011 was weaker than expected for Hawaii construction because of a slack housing market, lower value than forecasted for government contracts, and delays in rail contracts as highway supporters mounted legal challenges to the project.

In 2012 the forecast sees a doubling of government construction spending, from $431 million in 2011 to more than $900 million – perhaps more if rail construction takes off.

Residential construction permit applications fell 12 to 19 percent on neighbor islands in 2011 and are now at less than a quarter of the peak volume of 2005. Oahu permits were down 6 percent last year, offset by a sizable increase in additions and alterations work.

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