Isle construction
down again

Bankoh forecasts another weak year,
but says the cycle may almost be over

By Russ Lynch
Star-Bulletin

Hawaii's construction industry is expected to remain in the doldrums this year, with 1997 showing an overall decline from last year in terms of money spent, Bank of Hawaii said today.

But things aren't likely to get much worse, the bank's chief economist, Paul Brewbaker, said in his annual report on the construction industry.

"After a construction recession lasting five years, the industry is apparently close to the bottom of its cycle," he said.

The dollar value of building work done increased a little last year, up 1.4 percent from 1995 at nearly $3.2 billion. However, the value increase came with some strongly negative trend lines pointing to a decline this year, Brewbaker said.

The construction industry lost nearly 3,000 jobs in 1996, ending the year with 23,450.

With home sales in a slump, permits for residential construction dropped by a sharper than expected 29.2 percent last year and commercial construction permits were down 24.1 percent, Brewbaker said. The drop in permits issued last year will translate into a drop in work done this year, he said.

Commitments for government construction rose 20.8 percent last year from 1995, but that isn't enough to overcome the private and commercial downturns. The bank said that taken together, the permit figures indicate some decline, although probably a slight one, this year in some or all of the construction industry indicators.

However, permits for private construction are likely to rise this year, Brewbaker said.

Eventually, state government capital improvement projects will come on line, he said. Earlier this year, the Legislature voted a $2.4 billion construction budget for the next two fiscal years and approved $1 billion in bonds, requested by Gov. Ben Cayetano, to get construction moving.

Also, Waikiki redevelopment projects will begin to show up, Brewbaker said. The City Council in December voted for a Waikiki Special District plan to allow hotel owners to renovate their properties and do some rebuilding.

But both of those changes will take time to show up in real improvements in the construction industry, Brewbaker said. He detailed the results of the bank's latest study at a breakfast meeting at the Plaza Club.

The final 1996 results were better than the bank predicted at last year's meeting. At that time, with permits down and a lower commitment for government projects, the bank expected a 6 percent drop in construction completed last year, rather than the increase that actually happened.

A year ago, the bank believed island construction would not pass the $3 billion mark until 1998.