NEW YORK—Tracking the construction industry and forecasting what the likely trends are is something that economist Robert Murray has been doing for 15 years. Add in a couple of market slumps and a financial crisis and forecasting is not such a simple task.
“It's been a moving target for all of us,” he said. Murray, vice president of economic affairs at McGraw-Hill Construction, has a clear picture of the industry. He determines the broad forecast pattern used by the company’s information products, and functions as the company’s chief economic spokesperson.
He is confident he has caught the direction this time. “I think we've been on target in terms of direction. I would characterize it as cautious but accurate.”
Murray spoke at the “Managing Construction’s Financial Crisis” conference hosted by McGraw-Hill last week in New York. There have been slumps before, but what’s different about this downturn is the “extent of the financial system problems. And how it will work against a quick rebound,” he said.
“You know we have had sharp downturns before. There was a sharp downturn again in the early 1990s, and there was a sharp downturn in the early 1980s. Each so has assumed a somewhat different character. If you look at the pull-back that took place in the early 1990s it was in response to the excessive amount of building for offices that took place in the 80s.”
There were a variety of factors involved in the latest financial slump. “I think greed entered into it. But I think also a move towards deregulation contributed. I think the complexity of the financial instruments contributed. And that is something that regulation in the future will probably watch more closely,” he said.
“I guess we're really paying the price for the deregulation that took place in terms of real estate finance, and the investment banking sector really went out of existence in the fall of 2008.”
Murray believes there will be a return to stricter regulation in the financial sector, and he is hoping “calm heads will prevail for a tightening of regulation—but not excessive—because if you do it excessively, you are also going to essentially dampen growth.”
Times have changed for developers, but there are still projects going ahead. “Find the niches that are still showing decent activity, and look even harder for projects that are still going ahead,” he advised.
“For anybody that can get the financing, in terms of the low cost of financing, [and] in terms of the low cost of materials, now is really a great time to go ahead.”
Murray received his bachelor's degree from Princeton University, and he holds both an M.B.A. and a Master's degree in economics from Columbia University.