"The construction industry has lost some momentum during 2003, but so far it's been a controlled descent," stated Robert A. Murray, vice president of economic affair for McGraw-Hill Construction Dodge. "Housing continues to move at a healthy clip, and while commercial building is still weakening, its rate of decline is not as severe as a year ago. At the same time, tighter fiscal conditions have dampened both institutional building and public works, marking a change from their performance during 2001 and 2002."
Nonresidential building, at $144.4 billion, fell 3% in May. After April's improved contracting, several commercial categories once again experienced weakness – warehouses, down 5%; offices, down 11 %; and hotels, down 40%. Store construction ran counter to this declining trend, rising 23% with the help of an $80 million project in Atlantic City and a $60 million project in Chicago. Murray indicated, "Store construction continues to move at a good pace, driven by the needs of retailers and developers to stand out in the competitive retail landscape, plus the greater demand for retail space arising from the surge of residential development." The manufacturing plant category in May advanced 18% versus a weak April, yet its level of contracting continues to be depressed.
The institutional side of the nonresidential market was generally weaker in May. School construction slipped 2%, while more substantial declines were reported for public buildings (courthouses and detention facilities), down 25%; healthcare facilities, down 27%; and transportation terminals, down 45%. The diminished fiscal health of states and municipalities is beginning to have a more discernible negative impact on the institutional structure types. On the plus side, two institutional categories were able to show growth in May – churches, up 2%; and amusement-related projects, up 33%. In the latter case, much of the gain came from the start of a $100 million university recreational facility in Ohio.
For the first five months of 2003, the 5% decline for total construction compared to 2002 was due to this behavior by major sector – residential building, up 5%; nonresidential building, down 10%; and nonbuilding construction, down 20%. On a regional basis, total construction during the January-May period of 2003 was the following – the West, up 7%; the South Central, up 2%; the South Atlantic, down 3%; the Midwest, down 10%; and the Northeast, down 26%.