Construction Contracting Advances 3% in April
March showed single family housing settling back to a more sustainable pace, but it also featured a retreat for public works as well as further weakening for commercial building. "It's true that new construction starts are no longer seeing the 4% to 5% rate of growth that occurred during 2000 and 2001, but contracting in a broad sense is avoiding a protracted decline. Continued strength for single family housing in 2002, with added support from institutional building and public works, is helping to offset a diminished volume of commercial building," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.
Nonresidential building in April was reported at $152.1 billion, up 3%. School construction continued its robust performance, rising 18%. Other institutional categories showing April gains were religious buildings (up 10%) and healthcare facilities (up 2%), while declines were reported for amusement-related projects (down 15%), courthouses and detention facilities (down 20%), and transportation terminals (down 57%).
"School construction continues to be an important base of support for the nonresidential sector, and it's on track to at least match if not surpass the record high posted in 2001," stated Murray. "While there's concern that tighter state and local fiscal conditions will eventually dampen the amount of school construction, it has yet to show up at the construction site. Another plus for the nonresidential sector in the early months of 2002 has been hospital and clinic construction, continuing the strengthening trend that began last year."
The commercial side of the nonresidential market witnessed a mixed pattern in April. Growth was reported for stores (up 9%) and offices (up 5%), but warehouses and hotels were down 11% and 7%, respectively. "Office construction over the past year experienced a steep decline, and the modest improvement reported in February and April suggests that its correction may be easing," noted Murray. "At the same time, a sustained rebound for office construction is not likely to occur soon, since vacancy rates remain high in many metropolitan areas."
After an extremely weak March, manufacturing plant construction rebounded 48% in April; however, the level of contracting for this category was still 30% below its depressed pace for all of 2001. On a geographical basis, total construction in this year's first four months was the following: the Northeast, up 11 %; the South Atlantic, up 8%; the Midwest, up 5%; the West, down 6%; and the South Central, down 9%.