Nonresidential Sector Leads New Construction Starts

The upward movement of new construction starts in March continued through April, rising 3 percent to a seasonally adjusted annual rate of $533.7 billion, according to McGraw Hill Construction.

“With construction starts now climbing for two months in a row, it’s become more apparent that some of the lackluster activity in early 2014 was due to tough winter weather conditions,” says Robert A. Murray, chief economist for McGraw Hill Construction.

Nonresidential building led the way in April, increasing 14 percent to $202.8 billion and registering a double-digit gain for the second straight month. The often volatile manufacturing plant category accounted for much of that lift, jumping 146 percent in April, spearheaded by a $3 billion ethylene plant project in Texas.

The commercial categories as a group increased 11 percent in April, according to the report, led by a 93 percent surge from warehouse construction and a 34 percent rise in store construction. Hotel and office construction, however, slipped 11 and 8 percent, respectively.

Meanwhile, the institutional categories as a group dropped 11 percent in April, being dragged down by an 11 percent drop in new construction on healthcare facilities. The public buildings category saw a 59 percent decline in April.

Residential building grew 4 percent in April to the tune of $214.4 billion. Multifamily housing led the way in that category, rising 19 percent after a 9 percent drop in March. Single family housing, however, slipped an additional 1 percent in April and has shown “modest deterioration” for six straight months.

“There’s growing concern that tight standards by mortgage lenders, particularly to first-time homebuyers, are holding back the single family recovery,” says Murray, “and federal regulators are now looking at ways to encourage Fannie Mae and Freddie Mac to make credit more available to potential homebuyers.”

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