April Construction Advances 9%

New York, N.Y. – May 22, 2008 – The value of new construction starts in April climbed 9% to a seasonally adjusted annual rate of $553.5 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Much of the increase came as the result of a strong performance by nonbuilding construction, which is comprised of public works and electric utilities.  Nonresidential building showed moderate improvement in April, while residential building stayed unchanged from its March pace.  For the first four months of 2008, total construction on an unadjusted basis came in at $170.4 billion, down 17% from the same period a year ago.  Excluding residential building, new construction starts in the first four months of 2008 rose 3%.

April’s data produced a reading of 117 for the Dodge Index (2000=100), up from a revised 108 for March, and equal to the average for January and February.  “While housing is still in the process of reaching bottom, and tighter lending standards are raising concern about the prospects for commercial building, publicly-financed construction is expected to hold up relatively well during 2008,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “The strength shown by the public works categories in April, along with the elevated activity for several institutional structure types, supports this belief.”

Nonbuilding construction in April jumped 28% to $162.4 billion (annual rate), reflecting gains for both public works (up 24%) and electric utilities (up 41%).  Of the public works categories, the largest increase was reported for water supply systems, up 167%.  The boost to the water supply category was provided by the start of a massive $1.3 billion water treatment plant in Westchester County, New York, as well as by $115 million for reconstruction of a water treatment plant in Phoenix AZ.  The water resources category also witnessed substantial growth, rising 74% with the push coming from $200 million for a reservoir project in West Palm Beach FL and $57 million for harbor dredging in Boston MA.  After a very strong March, sewer construction in April edged up an additional 2%, helped by the start of a $278 million water pollution control project in Brooklyn NY.  April also saw a 21% rebound for bridge construction, while “miscellaneous” public works rose 20%, lifted by the start of a $378 million light rail project in Denver CO and a $100 million oil pipeline in Minnesota.  Running counter to April’s broad upward trend for public works was highway construction, which slipped 8%.  The boost provided to the April nonbuilding total by electric utilities came mostly from the start of one project – a $2.9 billion coal-fired power plant in Illinois.

Nonresidential building in April grew 5% to $210.6 billion (annual rate), after dropping 25% in March.  Healthcare facilities had a particularly strong April, jumping 41%, as five large hospitals reached groundbreaking in these states – New York ($195 million), Tennessee ($188 million), Indiana ($185 million), Maryland ($150 million), and Washington ($142 million).  Substantial gains were also registered by two of the smaller institutional structure types.  The amusement category soared 82%, aided by the start of a $400 million convention center expansion in Philadelphia PA, plus the start of several large theater and performing arts facilities in California, Florida, and Washington DC.  Transportation terminal work climbed 52%, led by a $126 million terminal renovation at Miami International Airport and a $90 million terminal expansion at Washington Dulles International Airport.  Church construction also helped out, climbing 10% in April.  On the negative side, the public buildings category (detention facilities and courthouses) fell 25% after an exceptional March.  And, educational buildings (the largest nonresidential category by dollar volume) settled back 10% in April after heightened contracting in March.

The commercial structure types generally showed modest weakening in April.  Office construction eased back 1%, although April did include the start of four sizeable projects, located in Washington DC ($210 million and $101 million), Atlanta GA ($175 million), and New York NY ($100 million).  Hotel construction in April dropped 5%, sliding for the second month in a row after the robust volume reported at the outset of 2008.  Store construction in April fell 8%, and Murray noted that “the store category in particular is vulnerable this year, as retailers pull back on expansion in the face of tighter credit conditions and weaker consumer spending.”  Warehouse construction in April edged up 1%, yet its pace so far in 2008 lags behind last year.  Manufacturing plant construction in April climbed 63% after a very weak March, as two large ethanol plants reached groundbreaking, located in North Carolina ($100 million) and Indiana ($80 million).

Residential building, at $180.5 billion (annual rate) in April, was essentially unchanged from March.   Single family housing continued to lose momentum, slipping 1%.  Although the decline was relatively small, it did extend the downward trend that has been underway for over two years now.  By major region, single family housing in April showed further reductions in the South Atlantic, down 6%; the West, down 2%; and the South Central, down 1%; while modest improvement was reported in the Northeast, up 3%; and the Midwest, up 4%.  Multifamily housing in April increased 3%, helped by the start of four large projects located in Chicago IL ($132 million), Washington DC ($107 million), Port Washington NY ($101 million), and Atlanta GA ($100 million).  Murray stated, “There is still the occasional month that includes large multifamily projects, like April, but the number of such projects reaching groundbreaking has become considerably less than a year ago, given the unraveling of the condo boom.”

The 17% decline for total construction in the first four months of 2008 relative to last year was due to this pattern by sector – residential building, down 39%; nonresidential building, up 1%; and nonbuilding construction, up 5%.  By geography, four of the five major regions experienced diminished contracting in the January-April period – a 25% reduction in the South Atlantic and 19% declines in the West, Midwest, and South Central.  The Northeast was the only major region able to register a year-to-date gain for total construction, climbing 12%.

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APRIL 2008 CONSTRUCTION STARTS

MONTHLY SUMMARY OF CONSTRUCTION STARTS
Prepared by McGraw-Hill Construction Research & Analytics 

Monthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of Dollars

The Dodge Index
(2000=100, Seasonally Adjusted)

April 2008........................................117
March 2008.....................................108

YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars