Very Little Blooming This Spring

New construction starts in April dropped 9 percent to a seasonally adjusted annual rate of $397.6 billion, according to McGraw-Hill Construction, Bedford, Mass.

Much of the decline was caused by a pullback for non-residential building, which in recent months had appeared to be stabilizing after its steep downturn, according to McGraw-Hill.

The housing sector also lost momentum in April, slipping back after recent gains. Running counter to the downward trend in April was non-building (infrastructure) construction, which registered moderate growth thanks to heightened activity for environmental public works and electric utilities.

During the first four months of 2010, total construction on an unadjusted basis came in at $125.8 billion, essentially the same amount as reported one year ago.

“The April decline indicates that the construction start statistics remain in an up-and-down pattern, in contrast to what appeared earlier to be evidence that a modest upward trend was taking hold,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “The commercial building market is still beset by rising vacancies, and it will take some time before the improving employment picture helps vacancies to recede. Tight state and local fiscal conditions are having a dampening impact on the institutional building market. The housing upturn is still in its early stages, subject to the occasional setback. The public works sector is the one bright spot for construction.”

Non-residential building in April dropped by 23 percent. Spending in the first four months of 2010 is down by 18 percent compared to the January-April 2009 time frame. Office construction in April dropped 48 percent compared to March, which was lifted by groundbreaking for the $369 million U.S. Coast Guard headquarters in Washington, D.C. The largest office project reported as an April start was a $40 million corporate headquarters in Cambridge, Mass.

Contracts for health care facilities in April decreased 40 percent, following a March that was buoyed by the start of nine large hospitals valued at $50 million or greater. April did include the start of four large hospitals located in Arizona, Florida, Georgia and Illinois.

On the plus side, a few non-residential categories in April posted gains. These included stores and shopping centers, up 6 percent; and hotels, up 35 percent; both relative to low amounts in March. The transportation terminal category in April soared 90 percent, reflecting the start of a $107 million rail and bus terminal in Denver and a $75 million addition to an airport terminal in Portland, Maine.

Residential building activity decreased 7 percent in April. By region, the largest decline in single-family housing in April was in the South Atlantic, down 13 percent.

Infrastructure spending in April advanced 6 percent, with strong growth reported for environmental public works, including hurricane reconstruction efforts in southern Louisiana.