February Construction Rises 2% Nationwide

At a seasonally adjusted annual rate of $561.3 billion, new construction starts in February advanced 2% from the previous month, as reported by McGraw-Hill Construction, a division of The McGraw-Hill Cos.

The gain for total construction reflected a strong performance by nonresidential building, which for the second month in a row was boosted by groundbreakings for several large projects. At the same time, nonbuilding construction fell back from January’s elevated pace and residential building dropped further as its lengthy correction continues.

For the first two months of 2008, total construction on an unadjusted basis came in at $79.1 billion, down 18% from the same period a year ago. If residential building is excluded, the value of new construction starts during the first two months of 2008 increased a slight 1% compared to last year.

February’s data lifted the Dodge Index to 119 (2000=100), up from 117 in January. After weakening substantially during the latter half of 2007, the level of contracting has now shown improvement for two consecutive months.

Nonresidential Building

Nonresidential building in February surged 23% to $270.5 billion, continuing its rebound from the depressed activity at the end of 2007. Hotel construction had a particularly strong February, soaring 94% with the main push coming from the start of two massive projects $1.1 billion for the hotel portion of the Revel Resort Hotel and Casino in Atlantic City N.J., and $1.1 billion for the hotel portion of the Echelon Resort in Las Vegas. In addition to these two massive projects, the hotel category also included three additional projects valued each at $100 million, two in Las Vegas and one in Atlanta.

Store construction in February jumped 30%, helped by $245 million for retail work at the Revel Resort project in Atlantic City, $150 million for retail work at the Echelon Resort project in Las Vegas and $100 million for a large retail facility in Yonkers, N.Y.

Warehouse construction, rising 6%, also contributed to February’s strong nonresidential amount. The office category in February included the start of another huge project at the World Trade Center site in lower Manhattan the $1.4-billion World Trade Center Tower 2. However, since January included groundbreaking for the $1.4-billion World Trade Center Tower 3 and the $1.1-billion World Trade Center Tower 4, the pace of new office starts in February was down 23%.

Manufacturing plant construction in February climbed 36%, aided by the start of a $190-million ethanol plant in Iowa. Heightened contracting was also present across a number of institutional structure types.

Health care facilities jumped 58%, as February witnessed the start of four large hospital projects located in Virginia ($594 million), California ($200 million), Maryland ($150 million) and Pennsylvania ($109 million). This was reminiscent of the peak activity reported back in 2006, before the modest slowdown for large hospital projects that took place in 2007.

Each of the smaller institutional categories registered strong February gains. This included a 362% hike for public buildings, led by the start of a $1.2-billion federal government facility in Virginia, plus the start of a $146-million military facility in North Carolina.

Amusement-related projects advanced 52%, helped by the start of a $225-million casino in Pittsburgh, plus $111 million for the casino portion of the Revel Resort project in Atlantic City and $100 million for the convention center portion of the Echelon Resort in Las Vegas.

Transportation terminals and churches rebounded from a weak January, climbing 63% and 36% respectively. School construction was the one institutional structure type that lost momentum in February, slipping 13%, even though February did include the start of a $235-million research center in St. Louis.

Nonbuilding Construction

Nonbuilding construction, at $105.5 billion, fell 24% in February after January’s 28% expansion. Decreased contracting was present across most of the public works project types. The miscellaneous public works category, which includes mass transit and site work, dropped 44% in February compared to a January that included the start of a $1.1-billion subway line extension in New York City.

Bridge construction was also down sharply, sliding 31% from a January that included the start of a $453-million bridge project in Louisiana. Additional declines in February were registered by river/harbor development, down 21%; water supply systems, down 19%; and highway construction (the largest public works category), down 5%.

Sewer construction was the only public works category to see growth in February, climbing 17%. Electric utilities also contributed to February’s nonbuilding decline. After an exceptionally strong January, new electric utility work retreated 49% although February did include the start of a $727-million power plant project in Wyoming.

Residential Building

Residential building in February dropped 3% to $185.3 billion. Single-family housing fell an additional 6%, extending its lengthy downturn. The February weakness for single-family housing was widespread geographically, as shown by this regional pattern the Midwest, down 16%; the South Atlantic, down 7%; the West, down 4%; the Northeast, down 3%; and the South Central, down 2%.

Multifamily housing in February increased 6%, lifted by the start of a $147-million, mixed-use facility in Boston, plus the start of a $62-million condominium project in Parrish, Fla., a $62-million, mixed-use facility in Jersey City, N.J., and a $62-million independent/assisted living facility in National City, Calif.

Multifamily housing is still trending downward the February pace for multifamily housing in dollar terms was 28% below the monthly average for 2007.

The 18% decline for total construction during the first two months of 2008, compared to last year, was the result of this behavior by major sector—nonresidential building, up 10%; nonbuilding construction, down 14%; and residential building, down 41%.

By geography, the first two months of 2008 showed a greater dollar amount of construction starts in the Northeast, up 19%. The other four regions showed declines for total construction relative to last year the West, down 13%; the South Central, down 19%; the South Atlantic, down 31%; and the Midwest, down 34%.

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