Commercial Real Estate and Contractors and Development/Redevelopment and Construction Bids/Contracts and Construction and Real Estate & Retail

Construction activity falls to near-decade low

March 1, 2011

Builders began work on fewer offices, shopping centers and other commercial projects in January, pushing construction spending down to near a decade low.

The Commerce Department said Tuesday that builders trimmed their activity 0.7 percent in January following a revised 1.6-percent decline in December.

The consecutive declines pushed total spending down to a seasonally adjusted annual rate of $791.8 billion in January, close to the decade low of $791.5 billion hit in August.

The current pace of construction activity is just about half of the $1.5 trillion level that economists believe would signal a healthy construction sector. They think it could be another four years before construction recovers to that level.

Builders have struggled with falling demand since the housing bubble burst, helping to push the country into the deep 2007-2009 recession. The recession lowered overall economic activity and that depressed demand for office buildings, hotels and shopping centers. In addition, banks tightened lending standards, making it harder for builders to get financing for projects.

For January, total private construction fell 1.2 percent, to a seasonally adjusted rate of $490 billion.

Housing activity rose 5.3 percent, to a rate of $245.6 billion, but private nonresidential construction dropped 6.9 percent, to a rate of $244.4 billion. The weakness in this area was led by an 18.2-percent drop in construction of hotels and motels. Spending on office buildings fell by 6 percent and the category that includes shopping centers was down 1.4 percent.

Government construction edged up 0.1 percent to an annual rate of $301.8 billion in January, supported by a 9.1-percent rise in federal projects, which climbed to an annual rate of $31.5 billion.

Construction by state and local governments fell 0.9 percent, to an annual rate of $270.4 billion. Building at the state and local level is being constrained by efforts to get control of large budget deficits.

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