"Total construction activity during 2003 is expected to see some loss of momentum, and February's mild setback is consistent with that trend," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction Dodge. "Last year, the brisk pace for single family housing offset weakness for commercial building, but sluggish employment and shaky consumer confidence are beginning to dampen homebuyer demand. Tighter fiscal conditions are now having a restraining impact on institutional building and public works. The commercial structure types remain generally depressed, but on a positive note, their up-and-down pattern of recent months suggests that a leveling-off process is underway, following the extended slide witnessed over the past two years."
Nonresidential building in February decreased 2% to $142.2 billion. The institutional side of the nonresidential market dropped 7%, due to reduced contracting for amusement-related projects (theaters, exhibition halls), down 19%; health care facilities, down 23%; and transportation terminals, down 27%. Cushioning the institutional retreat were increases of 3% for school construction and 20% for public buildings (courthouses and detention facilities).
Manufacturing plant construction continued to languish, falling 31% after its brief upturn in January. On the commercial side, February showed gains for offices, up 6%; warehouses, up 28%; and hotels, up 50%. The office category was supported by the start of a $122 million government office building in San Jose, CA, a $53 million office building in Rockville, MD, and another $53 million office building in Mobile, AL.
Murray indicated, "Office construction is now showing just half the volume reported back in 2000, but the past few months have seen new office starts stabilize, helped by the occasional large government office project and continued construction in secondary markets." The substantial gain for hotel construction in February was also aided by large projects, including the start of a $57 million hotel in La Jolla, CA and a $30 million hotel in Pittsburgh. Store construction in February fell 5%, running counter to the gains shown by the other commercial structure types.
On an unadjusted basis, total construction during January and February of 2003 was down 10% from the same period a year ago. The first two months of 2002 featured an unusually high volume of construction starts, and it's expected that the gap will narrow as 2003 proceeds. The major sectors showed this year-to-date performance – residential building, up 4%; nonresidential building, down 18%; and nonbuilding construction, down 27%. By geography, total construction during the January-February period was the following – the West, up 6%; the South Central, down 9%; the South Atlantic, down 10%; the Midwest, down 16%; and the Northeast, down 31%.