After falling for three years from the previous peak in 2001, U.S. education sector construction starts are once again on a robust upward trend. A yet-to-be-released report from McGraw-Hill Construction’s Research and Analytics group provides a broad-based look at the impact of the vast investment in education construction over the past two and a half decades. Education construction starts rose by 270% from the market’s low point in 1981 to the peak in 2001 to reach an unprecedented 273 million square feet. Following that peak, the economic recession in the early 2000s took a toll on funding for education projects and starts fell sharply. By 2004, education construction starts had declined 23% to just 209 million sq ft.

Fortunately, the downward trend in education construction ended in 2005. Education square footage grew by a moderate 5% in 2005 and another 4% in 2006 to reach a total of 227 million sq ft. Even while education starts spiraled downward, vibrant demographic trends created a continued need for expansion. Only the weak economy and its negative impact on state and local budgets prevented further growth in the education sector. As the economy improved, funds once again become available and pent-up demand from deferred projects helped produce solid gains.

Despite the downturn early in this decade, U.S. investment in education construction continues at an impressive level. From 2001-2006, 73,443 education projects broke ground with an associated construction cost of $264.8 billion. Of these projects, 58,550 were new construction or additions to existing structures costing $213 billion, while an additional 14,893 projects were alterations to existing structures (no additional square footage added) with a construction cost of $52.0 billion.

School construction projects (K-12) claimed the largest share (66%) of total education starts from 2000-2006. Within the K-12 sector, high schools were 31% of total value, while primary schools were 25% and junior high schools 11%. College and university starts (including community colleges) were another 16% of the value of education starts over the 2000-2006 period. Other sectors within education accounted for smaller shares of the total: education laboratories were 7%, libraries/museums 7%, and other schools (i.e. vocational schools, nursery schools, daycare and special education) accounted for a 5% share.

Some of the largest projects that broke ground in 2006 included the $150-million Art Institute Museum expansion in Chicago, the $150-million Tarrant County College campus in Fort Worth, Texas, the $110-million University of Chicago Research Lab, and the $110-million Central Los Angeles High School. These projects helped the value of education construction starts to increase 10% in 2006 to $49.1 billion.

Improving fiscal conditions, coupled with increasing enrollments, should lead to continue strength in construction over the next few years as well. In 2007, education construction will continue on an upward trend: McGraw-Hill Construction expects education construction starts to increase 7% in square footage to 242 million sq ft and 9% in dollar value to $53.5 billion.

Several issues could cast a shadow over this otherwise bright near-term future. Rising energy costs and increasing prices for construction materials, for example, could continue to plague construction projects with budget overruns and project delays. Even more serious complications to education construction could arise if the U.S. economy were to slip into another recession, putting greater pressure on state and local budgets. Finally, if enrollments do not grow as anticipated (if, for example, immigration is seriously curtailed), demand for new space will soften. Today, these factors have a low probability of derailing the expansion in education construction, but they are very real risks to the forecast.