Alaska construction spending predicted to drop 18 percent this year

Alaska's construction industry is expected to be one of the harder-hit sectors in the dark economic year predicted for the state, and a new report shows just how hard.

The total value of "on the street" construction spending in Alaska in 2016 is expected to be $7.3 billion, an 18 percent drop compared to last year, according to an annual construction forecast report by the Institute of Social and Economic Research at the University of Alaska Anchorage for the Associated General Contractors of Alaska and the Construction Industry Progress Fund.

"On the street" spending is for actual construction activity anticipated in 2016, according to the report. It is different from measuring new construction contracts.

Excluding oil and gas construction spending, which is expected to decline 25 percent, all other types of construction spending are forecast to decline 11 percent overall. Oil and gas construction spending hit an all-time high last year at $4.2 billion, the report said, and some of the predicted decline in that sector this year is also tied to the completion of several large projects.

Construction is the third largest industry in Alaska, accounting for 20 percent of the economy here, according to the report.

The drop in oil prices over the last 18 months is largely responsible for the expected decline in construction spending, the report said, "after the previous period of unprecedented high prices a few years earlier."

A recent decline in state funding for new capital projects will also begin to play out in 2016.


"The sharp decline in the state capital budget over the last three years has so far had limited effects on construction spending," the report said. "This is because it takes considerable time for appropriated funds to become 'cash on the street.'"

State spending won't fall too dramatically this year because "several billion dollars of capital appropriations remain 'in the pipeline' ... However, the amount of construction spending will be winding down in many communities like Juneau, Kodiak, and Fairbanks (excluding Eielson Air Force Base) because of declining state spending."

Some areas, of course, will fare better than others. Public construction spending is set to decline 6 percent, much less than private, at 24 percent. Spending for national defense construction is expected to increase 27 percent, and miscellaneous basic private spending is predicted to rise 39 percent. These basic industries include tourism, seafood, air cargo and timber -- sectors that benefit from lower oil prices.

Employment in Alaska's construction sector grew an estimated 6 percent in 2015. A report released earlier this month from the Alaska Department of Labor and Workforce Development predicted a loss of 900 jobs in the sector in 2016 -- a slight decline.

A recent survey of construction firms that do the largest amount of their work in Alaska found that they are pessimistic about the year ahead.

Annie Zak

Annie Zak was a business reporter for the ADN between 2015 and 2019.