April Starts Retreat 13%

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April Starts Retreat 13%

New construction starts in April fell 13% to a seasonally adjusted annual rate of $674.3 billion, according to Dodge Data & Analytics. “The construction start statistics can be volatile on a monthly basis, and given the wide swings present in March and April it’s probably best to take the average of the two months in assessing the current health of the construction industry,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The average for March and April shows that construction starts so far in 2018 are proceeding slightly behind last year’s average pace. Even with this modest slowdown in early 2018, there are several factors in the current environment that should help construction activity to stay close to recent levels. Job growth continues to be strong, with the unemployment rate at the lowest level since 2000, which should limit any upward movement by commercial vacancy rates this year. In its latest quarterly survey of bank lending standards, the Federal Reserve indicated that lending standards for nonresidential building projects eased slightly on net during the first quarter of 2018, following the tightening that took place from late 2015 through 2017. In March, Congress reached agreement on fiscal 2018 appropriations, providing additional funding for several public works programs. And, while interest rates are rising, the upward movement so far has been measured, with the ten-year Treasury bill stabilizing at about 3% from March through mid-May.” The commercial building categories as a group provided a relative bright spot for nonresidential building in April, rising 5% after a 15% decline in March. Office construction rebounded 18% after its 18% March slide, with the upward push coming from the $480 million addition to the Hudson Commons office building in New York NY, plus two data center projects in Ashburn VA valued respectively at $350 million and $135 million. Store construction grew 21% in April, while hotel construction advanced 25%. Large hotel projects entered as April starts were the $350 million Marriott Hotel at Bonnet Creek in Orlando FL and the $125 million Hyatt Centric Hotel in Philadelphia PA. On the negative side, commercial garages fell 37% in April and warehouse construction retreated 11% after posting a 32% gain in March. The warehouse pullback in April was cushioned by the start of three Amazon distribution centers located in Euclid OH ($175 million), Saint Peters MO ($75 million), and Macon GA ($70 million).