Buildings Keep Rising in Early '06

The value of new construction contracts has been consistent in the first two months of 2006, with an overall gain of about 9 percent over the value of activity in 2005.

Activity was consistent in January and February, according to the McGraw-Hill Construction division of The McGraw-Hill Companies, Lexington, Mass. Some forms of public works spending were down in February versus January, although highway construction spending actually increased.

“While somewhat slower than the brisk pace last fall, the level of construction contracting can still be viewed as healthy,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Although public works dropped back in February, the decline followed a strong January, and upcoming months should see the public works sector regain upward momentum,” adds Murray. “On balance, the first two months of 2006 have shown signs of the greater activity that’s anticipated for non-residential building and public works this year.”

Non-residential building in February climbed 6 percent to $181 billion in new contracts. After a very weak January, the two largest institutional structure types rebounded sharply: educational building projects up 45 percent and health care facilities spending up 48 perrcent.

Murray remarks, "The picture that’s emerging in early 2006 for educational buildings is that this structure type is continuing the moderate upward trend established last year, while health care facilities are holding close to the record pace of 2005.”

The commercial categories in February showed a varied performance. Hotel construction surged 69 percent, rebounding from a weak January, with the push coming from groundbreaking for the $60 million hotel portion of a $330 million hotel/casino in Detroit.

Store construction in February showed further expansion, rising 18 percent, but the office category in February dropped 44 percent. This was due in large part to the comparison versus a January that included the start of the massive Goldman Sachs headquarters in New York City. The manufacturing plant category in February dropped 39 percent, slipping back from its improved activity in January.

Residential building, at a $381 billion annual rate was up 2 percent in February. The dollar volume of new single-family homebuilding was unchanged from the previous month, while multi-family housing jumped 14 percent. Lifting the multi-family category were the start of five large condominium projects in San Francisco, Jersey City, N.J., Las Vegas, Chicago and Clearwater, Fla.

The continued presence of major projects in early 2006 suggests that any cooling down in the condominium market will be a gradual one, Murray suggets.

New activity in the infrastructure segment in February dropped 13 percent compared to a very active January. Most of the public works categories registered declines, including sewers, down 23 percent; bridges and river/harbor development, each down 22 percent; and water supply systems and site work, each down 15 percent.

On the plus side, though, highway construction in February rebounded 12 percent after a lackluster January, with large highway projects started in Arizona, Florida and Maryland. “With greater funding provided under the new multi-year federal transportation bill, plus the improved fiscal position of the states, it’s expected that highway construction for the full year 2006 will see growth close to 10 percent,” says Murray.