News

Square Footage of Building Starts Now Rising

0 173 Market Intelligence

Contractors will start buildings with 29% more square feet this spring than they started last spring during the worst panic period in the recession. While this is a substantial increase, it only restores the square footage of starts to just above the fall 2008 level when the initial shock of the financial crisis was causing widespread delays in construction starts, says Reed Construction Data chief economist Jim Haughey.

Contractors will start buildings with 29% more square feet this spring than they started last spring during the worst panic period in the recession. While this is a substantial increase, it only restores the square footage of starts to just above the fall 2008 level when the initial shock of the financial crisis was causing widespread delays in construction starts. Nonetheless, the impact of rising starts has already prompted resumption in construction hiring, a boost in construction materials production and a spike in construction materials prices.

The spring 2010 level of starts, bases on actual April starts and forecasts for May and June, is 30% below the spring 2008 level when the overall economy and construction were well into a slowdown period and 66% below the spring 2005 level at the peak of the economic and construction boom.

The pickup in starts over the last year was almost entirely for single family homes. The square footage of starts for single family homes increased by nearly one-third. Over the same period the square footage of multifamily starts dropped 17% and the square footage of nonresidential buildings increased 46%, largely due to a steep plunge in starts in June 2009.

The square footage of building starts is forecast to increase a further 19% from spring 2010 to spring 2011. All types of buildings will gain with single family homes accounting for two-thirds of the increase. Multi family housing will turn about and account for 22% of the square footage increase for all buildings. Starts square footage will rise 14% for nonresidential buildings. But by the end of 2011 the square footage of building starts will still be less than half of the peak 2005-2006 level.

The starts square footage metric exaggerates the decline in construction activity during the slowdown period because renovation work in existing space holds up much better than new building starts. Similarly, starts square footage measures underestimates the pace of recovery in construction activity because they do not include the resumption of work on suspended projects.

by Jim Haughey

Leave a comment

Or register to be able to comment.