The Official Online Weekly Newspaper of NAHB
Following some better news for commercial construction in March and April, construction start numbers for May released by McGraw-Hill Construction on June 23 show a decrease in nonresidential building. Increases in health care, warehouse and manufacturing building project starts were the high points amidst the otherwise discouraging news.
On a seasonally adjusted annual basis, the dollar volume of May’s overall new construction starts fell 6%, including a 12% slide in nonresidential starts to a yearly rate of $138.7 billion.
Nonresidential construction in May was down 8% from the start of this year.
“The pattern of construction starts continues to hover at a low volume, providing little evidence to this point that renewed expansion is taking hold,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.
“The current year has seen a few bright spots — such as gains for multifamily housing, manufacturing plants and electric utilities,” Murray said.
“In general, though, the parts of the construction industry that are most likely to see growth in the early stages of a cyclical upturn — such as single-family housing and commercial building — have either wavered or at best shown only intermittent gains,” he said.
"At the same time, the parts of the construction industry dependent on public financing — such as institutional building and public works — have weakened further. The result is that the current period of ‘bouncing along the bottom’ for total construction is becoming more and more extended.”
Nonresidential Building Figures
In the nonresidential sector, May saw declines of 64% in hotels, 59% in transportation terminal work, 27% in public buildings, 23% in amusement-related projects, 8% in offices and stores and 7% in educational buildings.
Warehouse construction jumped a hefty 39%, buoyed by two large buildings for discount retail chains in Indiana and Alabama.
Manufacturing buildings surged 35%, led by a new biofuel plant in Mississippi, a distribution facility in Illinois and a battery manufacturing plant in Delaware. Showing clear growth, manufacturing buildings were up 156% in May since the beginning of 2011.
Health care construction was up 15% in May, assisted by four new large medical and hospital projects — valued at $100 million to $300 million — started in Colorado, California, Florida and Texas.
NCBC member Fred Zumpano, principal of Zumpano + Hanson Building and Development in Akron, Ohio, cited the recent completion of two new hospitals in his northeastern Ohio market, which should slow demand for similar projects in the area as they are put in service.
However, the “renovation of existing medical suites both on and off campus has been consistently strong,” he said, although “ground-up ambulatory surgical center construction has slowed.”
Looking at his company’s prospects for health care projects in the future, Zumpano noted that “uncertainty over the health care bill has resulted in several of our projects being postponed or eliminated.”
According to the Associated General Contractors of America's analysis of U.S. Bureau of Labor Statistics employment data for May, 22 states plus the District of Columbia had added construction jobs over the previous 12 months; however, the remaining states all lost jobs.
Since May 2010, employment increased in 120 out of 337 metropolitan areas, declined in 162 and stayed level in 55, according to AGC.
“While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist.
“The close-to-even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting,” he said.