News

September Construction Starts Drop 39% from August

0 377 Market Intelligence

Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through September, excluding residential contracts, totaled $193.4 billion, almost exactly the same as in the first three quarters of 2009. However, individual month of September starts were 39% below August starts and 28% below last September.

Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through September, excluding residential contracts, totaled $193.4 billion, almost exactly the same as in the first three quarters of 2009. However, individual month of September starts were 39% below August starts and 28% below last September.

September is a seasonally normal month for construction starts so the seasonally adjusted monthly drop from August was about 25%. September starts were only marginally higher than in June 2009, the low point for starts in this building cycle.

The value of construction starts each month is summarized from RCD’s database of all active construction projects in the United States, excluding single-family homes. Missing project values are estimated using RSMeans’ building cost models.

The September starts drop more than offsets the (revised) 20% starts gain in August. Some of the September decline is due to concern about the summer slowdown in the economy but most of it is probably due to random measurement error. Preliminary data suggest that a similar huge decline did not occur in September residential starts.

Much weaker September starts is consistent with the reported 21,000 construction jobs lost in September after a 31,000 job gain in August. Lower starts are also consistent with the recent weakening in construction materials prices and orders for construction materials. Also note the 76,000 September job cuts by state and local governments, the greatest monthly job decline in several decades.

The largest September versus August declines were for highways and bridges (-$2.8 billion), education (-$2.1 billion) and water, sewer and civil projects (-$1.5 billion). Government office starts also fell significantly (-$0.5 billion). Capital investments are usually cut before employee layoffs are made. Public employee layoffs will continue but at a slower pace than in September when 50,000 school employees were dropped at the beginning of the new school year. Public starts will remain depressed for several more months.

Developer-financed starts fell $1.4 billion in September. But except for the small hotel market, the monthly decline was mostly seasonal or the reversal of large August gains.

Value of United States Construction Starts — September 2010
(Reed Construction Data)

  Jan-Sept
2010
(millions)
% Change
(Jan-Sept 10 vs
Jan-Sept 09)
  Jan-Sept
2010
(millions)
% Change
(Jan-Sept 10 vs
Jan-Sept 09)
Hotel/Motel $3,902 5.3%   Government Office $3,376 16.3%
Retail $11,090 -2.6%   Laboratory $2,321 -12.7%
Parking Garage $1,335 22.1%   Warehouse $1,210 -33.8%
Amusement $5,241 22.4%   Misc. Commercial $3,863 -27.9%
Private Office $6,979 -15.3%  
COMMERCIAL $39,317 -5.1%

INDUSTRIAL (Manufacturing) $2,098 -37.9%

Religious $1,597 -11.5%   Police/Courthouse/Prison $5,393 21.4%
Hospital/Clinic $13,726 -6.4%   Military $4,597 100.6%
Nursing/Assisted Living $2,207 -12.5%   School/College $39,038 -3.5%
Library/Museum $2,141 -5.4%   Misc. Government $5,265 8.3%
INSTITUTIONAL $73,964 0.9%  

Misc. Non-residential $1,562 -18.7%
NON-RESIDENTIAL BUILDING $116,941 -2.6%

Airport $2,092 -20.6%   Dam/Marine $1,757 -14.7%
Road/Highway $31,566 3.8%   Water/Sewage $20,673 24.3%
Bridge $9,178 -8.8%   Misc. Civil $11,156 -8.0%
HEAVY ENGINEERING $76,422 3.4%

TOTAL NON-RESIDENTIAL $193,363 -0.3%

Source: Reed Construction Data (RCD) and Property & Portfolio Research (PPR) (www.ppr.info).
Table: Reed Construction Data – CanaData.

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by Jim Haughey

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