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While most industry observers are looking to the residential market for growth these days, there’s a surprising number of giant commercial, institutional and industrial projects that have either recently broken ground or are now on the drawing boards. The projects include major port and rail line expansion, factories, hospitals, downtown redevelopment projects, office towers, mixed-use projects, airports and mass transit expansion.
While a quick glance at all of the $100 million-plus jobs in the chart on page 2 [Trophy Jobs on Tap or Underway] might make you think the long drought in the nonresidential construction industry is finally over, new construction data released earlier this week by the Census Bureau (see chart on page 4 [Value Of New Construction Put In Place — July 2013]) and the analysis of that data by two leading construction economists will tamp down any reason for wild celebrations.
Associated General Contractors (AGC), Washington, D.C., said in a press release that while total construction spending hit a four-year high in July as private residential and nonresidential activity increased — supported in large part by gains in single-family and multi-family housing — spending on public construction projects declined.
“The patterns seen earlier this year reappeared in July, with strong year-over-year gains in single- and multi-family building, a range of results for private nonresidential categories, and deepening downturns in most public segments,” said Ken Simonson, the association’s chief economist. “These trends are likely to hold for the remainder of 2013. Recent reports suggest the full year will continue to bring mixed news for construction. Multi-family construction will keep expanding and single-family homebuilding should do well in most regions. Private nonresidential spending will be very uneven and public construction spending remains threatened.”
In its analysis of the most recent U.S. Census data, McGraw-Hill Construction, New York, said new construction starts in July decreased 2% to a seasonally adjusted annual rate of $479.1 billion, and that the nonbuilding construction sector, comprised of public works and electric utilities, pulled back in July after being lifted in June by several very large projects. McGraw-Hill said that for the first seven months of 2013, total construction starts on an unadjusted basis were reported at $281.7 billion, up 1% from the same period a year ago. The year-to-date amount for total construction was restrained by a steep decline for new electric utility starts. If electric utilities are excluded, McGraw-Hill said in the press release that total construction starts for this year’s January-July period would be up 11%, reflecting a substantial increase for housing as well as moderate improvement for commercial building.
Robert Murray, V.P. of economic affairs for McGraw Hill Construction, also pointed to the uneven nature of the recovery in the construction market. “July’s modest decline for total construction was the result of diminished activity for public works, which can be volatile on a month-to-month basis depending on the timing of very large projects,” he said in the press release. “Aside from the public works shortfall, the July statistics provided evidence that the hesitant expansion for construction is proceeding. Housing continues to show upward movement, and the pace of commercial building continues to pick up gradually from very low levels.
“The institutional building portion of nonresidential building, which generally weakened during the first half of 2013, strengthened in July, suggesting that it may now be starting to stabilize after a lengthy decline that’s lasted for more than four years. While the recovery for construction may be broadening in scope, the process continues to be tenuous given the ongoing sluggish condition of the U.S. economy.”