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Building boom is slowing

January 1, 2000

Building boom is slowing

Construction has helped fuel the engine of economic growth for the Ninth District economy. In Minnesota and the Dakotas, contracts awarded for private and public buildings rose sharply in 1997 and 1998; however, the number of contracts awarded for building construction through October 1999 is slightly lower than 1998.

The demand for construction employees continues strong in many parts of the district. Construction wages in Minnesota have recently climbed more than 7 percent over last year, outpacing the nation by about 3 percent.

However, signs of slowing are emerging as building projects come to completion, especially in Minneapolis/St. Paul. The vacancy rate for office space in the metro area has recently increased, suggesting supply is catching up with demand. According to CB Richard Ellis, an international commercial real estate firm, vacancy rates are expected to climb over the next couple of years, reaching 14 percent by 2001.

Chart: Building Contract Awards

Chart: Office Vacancy Rates