The value of new construction starts slipped 2% in December to a seasonally adjusted annual rate of $575.2 billion, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. Both nonresidential building and housing settled back from their November pace, while nonbuilding construction held steady.

For the full year 2004, total construction climbed 10% to $582.9 billion. This follows a 5% gain in 2003, and marks the largest annual increase since the 10% rise back in 1999. "The year 2004 was led by further growth for single family housing, as low mortgage rates continued to support strong homebuyer demand," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

"At the same time, the emerging expansion for commercial building became more broad-based during 2004, including the first increase for office construction after the steep declines in the prior three years. The institutional building sector in 2004 was mixed - renewed growth for health care facilities, but school construction was constrained by tight fiscal conditions for states and localities. Public works was also mixed -- environmental projects rebounded after a weak 2003, but highway construction was essentially flat and bridge construction weakened. Going forward in 2005, it's expected that single family housing will ease back from its record 2004 pace, and the most likely candidate to pick up some of the slack appears to be commercial building."

Nonresidential building in December dropped 2%. Reduced contracting was shown by most of the commercial structure types, with stores down 8%; offices down 29%; and hotels down 55%. Manufacturing-related construction was also lower in December, sliding 34%; and declines were reported for school construction, down 8%; and amusement-related projects, down 18%. On the plus side, December showed warehouses bouncing back 92%, boosted by the start of two large distribution center projects located in California ($80 million) and South Carolina ($60 million). Also showing growth in December were transportation terminals, up 10%; health care facilities, up 19%; churches, up 45%; and public buildings, up 119%. The public building category was helped by the start of a $78 million detention facility in California and a $70 million military facility in Texas.

For 2004 as a whole, nonresidential building grew 3% to $160.0 billion. This marked a change from 2003, when nonresidential building was flat in dollar terms, and the 2001-2002 period when nonresidential building fell a combined 11%. In 2004, the commercial structure types provided much of the upward impetus. Store construction increased 5%, supported by the ongoing expansion of major retailers such as Wal-Mart and Home Depot, plus the trend toward open-air shopping centers. For 2004 as a whole, nonresidential building grew 3% to $160.0 billion. This marked a change from 2003, when nonresidential building was flat in dollar terms, and the 2001-2002 period when nonresidential building fell a combined 11%.

Hotel construction advanced 7%, buoyed by a number of large hotel/casino projects in Las Vegas as well as the start of several major convention center related hotels. Warehouses increased 10%, and office construction climbed 15% as this structure type turned the corner following the 43% decline in dollar volume reported during the 2001-2003 period. The metropolitan area with the highest dollar amount of new office starts in 2004 was New York City, surging 276% with the boost coming from groundbreaking for such major projects as the Freedom Tower, One Bryant Park, and the New York Times headquarters.

Growth for office construction was also reported in such cities as Atlanta, Chicago, Dallas, Los Angeles, and Phoenix. Murray indicated, "The level of office construction remains substantially below what took place in the late 1990s, but this structure type's sharp correction is now over, and the modest improvement in market fundamentals should enable construction to strengthen some more during 2005."

The 2004 nonresidential total included a 6% increase for manufacturing-related construction, consistent with the greater activity now being experienced by the nation's industrial base. The institutional structure types in 2004 showed growth for public buildings, up 4%; amusement-related projects, up 7%; and health care facilities, up 9%. However, school construction fell 7% for the year, continuing to slide back from its peak 2001 amount, as fiscal pressures are still having a dampening impact. Churches and transportation terminals also registered declines for the full year 2004, as each dropped 2 %.

The annual statistics for total construction in 2004 showed growth in all five of the nation's major regions. Leading the way was the South Atlantic, up 13%; followed by the West, up 12%; the Northeast, up 8%; and the South Central and Midwest, each up 7%.