The value of nonresidential construction starts – a barometer used by construction industry analysts to measure its economic health – climbed 6.3 percent in January 2010 from December, and 20 percent from January 2009, Reed Construction Data reported this month.
“January starts increased 10 percent for nonresidential buildings from December, but only 2 percent for heavy construction projects. Both highway and water/sewer starts fell slightly, but there were offsetting gains for airports and power projects,” Reed chief economist Jim Haughey wrote. “Starts jumped 47 percent for commercial buildings, reversing the large drop in November.”
New manufacturing projects, which are often heavily energy-related, fell to only 15 percent of the 2009 monthly average. Commercial starts, plagued by tight financial markets and the inability of some developers to obtain credit, were also down.
“This problem will worsen at least until mid-2010 as lenders continue to withdraw from real estate under pressure from rapidly rising commercial mortgage defaults. (Reed Construction Data) expects this restraint to be more than offset by the expected rising profitability of commercial property when it is completed nine months or more ahead,” he said.
Financing for institutional buildings, on the other hand, is not expected to improve during the first half of 2010.
Industry leaders also agreed that stimulus plan funding will not be significant until late in the year, in part due to declining government funding for all regular budget appropriations. Hospital and higher education work however, generate their own funding and will not be impacted by reduced government funds, Haughey said.