Nonresidential Construction Remains Weak in February
McGraw-Hill Construction's report on new construction starts in February showed continuing weakness in commercial structures, despite a 5% increase in overall new construction volume over the previous month to a seasonally adjusted annual rate of $440.9 billion.
Much of the lift was provided by the public works sector, reflecting strength for transportation and environmental projects and some improvement in home building, McGraw-Hill Construction said.
Nonresidential dropped 7% during the month following a 12% gain in January.
On an unadjusted basis, total construction for the first two months of this year amounted to $57.2 billion, essentially the same amount as reported for the same period of 2009.
“The pattern shown during February is what’s expected for 2010 as a whole — more public works construction, improved activity for residential building, but further weakness for nonresidential building,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.
Murray indicated that federal stimulus funding will continue this year to help boost highway and bridge construction in the public works sector. “However,” he said, “the tough environment for project financing remains a substantial constraint.”
February’s findings “held few surprises,” according to NAHB Senior Economist Bernard Markstein. “Federal stimulus funds are driving large infrastructure projects. Transportation, education and healthcare represent the areas of greatest strength. Strictly commercial projects continue to struggle. If there’s any optimism, it’s that we’ve been though the worst and hit bottom and we will begin to see a turnaround. If housing continues to improve, commercial will be close behind.”
“The report underscores what NAHB has been championing for a long time — that AD&C (acquisition, development and construction) credit availability is key to any recovery in commercial and residential activity and employment,” said Carl Harris, chairman of NAHB’s Commercial Builders Council and vice president and general manager of The Carl Harris Company in Wichita, Kan.
“While my company has been able to take advantage of the available public project funds, banks have to recognize that there’s money to be made in the light commercial market and should set more reasonable lending standards for AD&C credit so we can get back to work on the projects waiting to be built,” Harris said.
For more details from the February report, click here.