March and April starts will be key to determining the health of the construction industry.
Norcross, Ga. (PRWEB) March 19, 2014
Reed Construction Data reported the value of February construction starts, excluding residential contracts, dropped 15.6% to $15.9 billion, after falling 13.7% in January – the lowest value for starts since February 2012 and the third consecutive monthly decline.
Starts were down 3.2% from February 2013. Year to date, construction starts totaled $34.8 billion – 5.0% lower than the same two months in 2013. Because starts data are not seasonally adjusted (NSA), caution should be used in analyzing monthly movements. Year-over-year comparisons are often used, as they remove much of the seasonal effects.
“Given the unusually severe weather, which is continuing into March for much of the nation, it would be premature to conclude that nonresidential construction is in trouble,” stated Bernard Markstein, U.S. Chief Economist, Reed Construction Data. “March and April starts will be key to determining the health of the construction industry.”
The value of construction starts each month is summarized from the Reed database of all active construction projects in the U.S., excluding residential construction. Missing project values are estimated with RSMeans building cost models.
Commercial starts plunged 33.9% in February after also decreasing 14.5% in January. Year-to-date, commercial starts were 16.1% lower than in the same period last year. One bright spot is retail starts, which increased for the third month in a row, advancing 7.5% in February after advancing 14.1% in January. Year-to-date, however, retail starts were down 10.0% from the same period a year ago. Private office starts surged 47.8% for the month, but were down 17.6% on a year-to-date basis. Hotel and motel starts rebounded a robust 80.4% from January’s 59.6% nosedive. Year-to-date, they were down 16.3% compared to the same period in 2013.
After surging 47.8% in January, industrial (manufacturing) building starts tumbled 22.6% in February. On a year-to-date basis, due to an extraordinarily low number of starts last year, industrial starts were up an astounding 583% from the same period in 2013.
Institutional building starts sank 22.7% in February, after falling 10.8% in January. On a year-to-date basis, starts were down 3.1%. Starts for schools and colleges cratered 49.5% in February, after jumping 34.6% in January. Despite the sharp decline in February, starts were 18.1% higher on a year-to-date basis than the same period in 2013. Hospitals and clinics starts also saw an increase in February, up 34.6%, after dropping 36.9% in January; they were up a modest 1.7% year-to-date.
Heavy engineering (non-building) starts edged up 0.2% in February after decreasing 19.9% in January. Year-to-date starts were 12.1% higher than over the same period in 2013. Starts for all the categories in the group were up on a year-to-date basis. Road and highway starts, the largest spending category in the group, were up 6.1% in February and 11.1% on a year-to-date basis. Another large category, water and sewer starts, was up 5.7% in February and 9.0% on a year-to-date basis.
“If there is a silver lining to the harsh winter, heavy engineering seems to be fairing surprisingly well and may even be benefitting from the impact of the cold weather on the nation’s infrastructure,” said Markstein. “Bursting water pipes force utilities to make immediate repairs and replacements, accelerating planned pipe upgrade projects –particularly in the south where polar vortex visits tested infrastructure.
“Nonresidential building construction does not receive any such “benefit” from the bad weather and is clearly hurt by it. As a result, it is too early to determine the outlook for this sector of the construction industry based on the starts data until better weather prevails. Reed’s expectation is that delayed projects will move forward with improved weather, leading to large increases in starts at that point,” Markstein continued.
To view the complete report, click here.
A start is determined by taking the announced bid date and adding 30 days. It is then assumed the project will actually break ground within 30-60 days of the start date. Reed continues to follow the project via our network of researchers, so if the project is abandoned or rebid, the start data are subsequently updated to reflect the new information.
About Reed Construction Data
Reed Construction Data, a division of Reed Business Information and the Inaugural Strategic Partner of the AIA, is a trusted source for detailed, accurate, and up-to-date information on private and public construction projects across the United States and Canada. Reed’s data collection teams leverage strong industry relationships, innovative technology, and third-party data sources to deliver timely and accurate information on projects, companies, and contacts and daily updates for all types of general and civil construction. For more information, visit http://www.reedconstructiondata.com.