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January Construction Starts Experience Incraese

Feb 25, 2010 9:07 AM

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

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 increased 4% from December with significant gains for nursing homes, libraries/museums, educational facilities, and government offices.

Manufacturing starts, which are heavily energy-related, dropped 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.

For the full report, visit RCD's Web site.

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© 2012 Penton Business Media, Inc.

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