The value of new construction starts in December dropped one percent to a seasonally adjusted annual rate of $479.9 billion, according to the F.W. Dodge Division of The McGraw-Hill Companies (New York). Nonresidential building fell back after its improved pace in November, while gains were reported for housing and public works. For all of 2001, total construction advanced 3% to $485.2 billion, marking the tenth straight year of expansion. The 3% increase followed growth of 5% in 2000 and 11% in 1999.

"The construction industry slipped back during the first half of 2001, but then proved to be one of the more resilient sectors of the economy as the year progressed," stated Robert A. Murray, vice president of economic affairs for F.W. Dodge. "The relatively modest deceleration for total construction was the result of a varied performance by sector. Commercial building lost considerable momentum during the first half of 2001, and then experienced some additional weakening after September 11. At the same time, single family housing had a very strong 2001, helped by low mortgage rates, and school construction reached a new record high. Public works construction maintained its strengthening trend of recent years, and electric power plant construction continued to surge."

Nonresidential building in December fell 11% after the prior month's heightened amount. Commercial building was generally weaker, as declines were reported for offices, down 27%; hotels, down 24%; and stores, down 11%; while warehouses ran counter to this pattern with a 9% gain. The institutional side of the nonresidential market included reduced activity for transportation terminals, down 31%; schools, down 22% (after a robust November); and healthcare facilities, down one percent.

On the positive side, growth was reported for churches, up 5%; courthouses and detention facilities, up 7%; and amusement-related projects, up 33%, with the boost coming from the start of a $255 million performing arts complex in Miami. Manufacturing plant construction also managed a 12% gain in December, although the level of contracting remained very low.

For the full year 2001, nonresidential building was down 4% to $165.8 billion. The largest declines were reported for offices, down 22%; hotels, down 21%; and warehouses, down 15%. "After a very strong 2000, the demand for office space was dampened by the dot-com correction, as a substantial amount of sublease space was put back on the market," noted Murray. "The decline for office construction was especially pronounced in those cities that benefited from the high-tech boom, such as Washington DC, Seattle, San Jose, and Dallas. Development was also limited by tighter bank lending standards, and after September 11 projects were re-evaluated with regard to security and insurance concerns." Stores and shopping centers in 2001 posted a comparatively moderate decline of 9%, with the downward trend cushioned by greater construction activity from the more successful retail chains.

Most of the institutional categories witnessed growth during 2001. School construction advanced 16%, surpassing the previous record volume that had been achieved in 2000. Recent years have seen state and local governments approve greater funding for school construction, in order to deal with rising enrollments and the aging condition of existing schools, and this funding is now reaching the construction site. Transportation terminal work in 2001 climbed 25%, and gains were also reported for healthcare facilities, up 10%; courthouses and detention facilities, up 5%; and churches, up one percent. However, amusement-related projects were down 14% in 2001, as convention centers retreated from an exceptional 2000 and movie theater construction continued to see sharp retrenchment. The annual figures for total construction in 2001 showed growth in four out of the five major regions. Both the South Central and the Midwest registered 5% gains; followed by the West, up 3%; and the South Atlantic, up 2%. The Northeast, which had reported the largest percentage increase in 2000, was the only region to see a total construction decline in 2001, sliding one percent.