Reed Construction Data announced today that the year-to-date value of construction starts through November 2007, excluding residential contracts, totaled $276.626 billion, 12.9% higher than in 2006 and up 2.2% from October. November starts were 20% below the peak level reached in June to August of this year. The recent slowdown is more than the usual seasonal decline, suggesting that the long boom in non-residential construction is ending, at least in some construction markets.

The starts estimates are a summary from Reed Construction Data’s project database. Unreported contract values were estimated using RSMeans’ building cost models.

Starts of commercial buildings declined 5% from October, mostly for hotels, and were 30% below the June, 2007 peak level. The negative impact from more expensive commercial mortgages and lower anticipated investment returns in a weakening economy appears to have begun and is expected to become more significant. Slower growth in commercial construction also appears in the U.S. Census Bureau construction spending data through October and in the November jobs data for non-residential contractors.

Starts of institutional buildings increased marginally from October, but were more than 30% below the summer peak level. The slowdown encompasses all types of buildings. Education starts are now $3 billion below the summer peak level. This construction category is insulated from the immediate impact of problems in the financial market. Instead, public and non-profit facility managers may have become concerned about funding adequacy as stock indexes fell during the fall and many states reported tax receipts below budgeted levels at the start of the new fiscal year.

Heavy construction starts jumped 22.7% in November from an unusually weak October, but were slightly below the peak summer level. Allowing for seasonality, starts are strengthening in this sector. Water and sewer starts have doubled from earlier in the year. This offsets declines for highways and bridges, where contract awards are again being stalled by a delayed federal budget. This problem appears likely to persist for a few more months.

Member Comments