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January Construction Starts Higher

0 304 Market Intelligence

Reed Construction Data (RCD) announced today that the value of construction starts in January 2010, excluding residential contracts, totaled $24.1 billion, 20.1% more than in January 2009. January starts were 6.3% higher than December starts. Both months suffered from unseasonably poor construction weather which likely depressed starts as well as causing a large pickup in construction layoffs, says Reed Construction Data chief economist Jim Haughey.

Reed Construction Data (RCD) announced today that the value of construction starts in January 2010, excluding residential contracts, totaled $24.1 billion, 20.1% more than in January 2009. January starts were 6.3% higher than December starts. Both months suffered from unseasonably poor construction weather which likely depressed starts as well as causing a large pickup in construction layoffs. The poor construction weather has continued through mid-February. January starts were 30% higher than the monthly average in the first half of 2009.

The value of construction starts each month is summarized from RCD’s database of all active construction projects in the United States, excluding single-family homes. Missing project values are estimated using RSMeans’ building cost models.

January starts increased 10% for non-residential buildings from December but only 2% for heavy construction projects. Both highway and water/sewer starts fell slightly, but there were offsetting gains for airports and power projects.

Starts jumped 47% for commercial buildings, reversing the large drop in November. The rebound included all types of commercial projects except parking garages. Institutional building starts, always a steadier market, increased 4% from December with significant gains for nursing homes, libraries/museums, educational facilities and government offices.

Manufacturing starts, which are heavily energy-related, plunged to only 15% of the 2009 monthly average. Total 2009 starts fell 18% for non-residential buildings but increased 14% for heavy projects.

Commercial starts continue to be restrained by the inability of some developers to obtain credit. This problem will worsen at least until mid-2010 as lenders continue to withdraw from real estate under pressure from rapidly rising commercial mortgage defaults. RCD expects this restraint to be more than offset by the rising expected profitability of commercial property when it is completed nine months or more ahead.

By contrast, the availability of financing for institutional buildings will not improve in the first half of 2010. Stimulus plan funding will not be significant until later in the year. Funding in regular budget appropriations is now declining at all levels of government. Hospital and higher education generate their own funding and will not be impacted by reduced government funds.

Value of United States Construction Starts — January 2010
(Reed Construction Data)

  January
2010
(millions)
% Change
(Jan 10 vs
Jan 09)
  January
2010
(millions)
% Change
(Jan 10 vs
Jan 09)
Hotel/Motel $710 117.9%   Government Office $511 42.4%
Retail $1,174 4.8%   Laboratory $185 -18.0%
Parking Garage $110 -9.9%   Warehouse $166 -56.5%
Amusement $624 44.4%   Misc. Commercial $403 -66.9%
Private Office $1,302 2.0%  
COMMERCIAL $5,185 -5.0%

INDUSTRIAL (Manufacturing) $59 -82.8%

Religious $203 -10.1%   Police/Courthouse/Prison $540 49.7%
Hospital/Clinic $1,572 -1.9%   Military $591 117.3%
Nursing/Assisted Living $313 -27.7%   School/College $5,055 29.8%
Library/Museum $358 -38.6%   Misc. Government $419 -11.8%
INSTITUTIONAL $9,051 15.4%  

Misc. Non-residential $132 -38.2%
NON-RESIDENTIAL BUILDING $14,427 4.1%

Airport $178 176.0%   Dam/Marine $263 77.2%
Road/Highway $3,251 24.0%   Water/Sewage $3,525 127.3%
Bridge $882 33.0%   Misc. Civil $1,561 35.6%
HEAVY ENGINEERING $9,660 55.8%

TOTAL NON-RESIDENTIAL $24,087 20.1%

Source: Reed Construction Data (RCD) and Property & Portfolio Research (PPR) (www.ppr.info).
Table: Reed Construction Data – CanaData.

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by Jim Haughey

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