April construction starts highest in 18 Months
Preliminary estimates suggest that this non-residential gain will be more than offset by a decline in the value of residential starts. The 23% year-to-date increase in non-residential building starts, compared to the same period last year, will keep job-site construction spending rising through 2008 on top of the 16.4% gain reported by the U.S. Census Bureau over the last 12 months.
The value of construction starts is summarized from Reed Construction Data’s database of all active construction projects in the U.S. Unreported project values were estimated using RSMeans construction cost models. The year-long slowdown in Gross Domestic Product (GDP) growth has not yet restrained the demand for non-residential space and facilities because of the long planning and financing cycle for these projects.
However, this negative impact on demand is expected to be a restraint at the pre-bid phase this summer, the starts or bid phase by year-end and on job-site spending by late next year. Commercial starts in April were the second highest ever reported, below only January 2007. Institutional starts in April were the third highest ever reported.
Hotels and offices continue to be the fastest-growing commercial sectors. Developers anticipate high rates of returns on these projects, based on rapid increases in rental rates and enough additional demand to absorb the new supply expected over the next year, without increasing vacancy rates.
Education has replaced health care as the fastest expanding institutional sector, although the small nursing-home market is still expanding rapidly. School and college construction is being funded from the near record level of state and local government budget reserves.