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New Construction Starts Show Slight Gain in 2018
But Declines Are Registered in Final Two Months

New Construction Starts Show Slight Gain in 2018

In spite of a rise in total constructions starts last year, nonresidential building slipped 1% after an 11% surge in 2017.

The final tally on total construction starts last year managed to eke out a gain over 2017 but nowhere near the upturns experienced that year and 2016. The year-over-year increase was just 0.3% compared to 7% growth in each of the following two years.

But if the electric utilities and gas plants sector, the biggest loser at -31%, was excluded from the total, the yearly gain would be 2%.

"There were several noteworthy features that stand out in the 2018 construction starts data," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "Last year's brisk economic expansion enabled market fundamentals for multifamily housing and commercial building to strengthen, which supported more growth for apartment projects, office buildings, and hotels. However, store construction continued to decline, adversely affected by the glut of retail space produced in the previous decade as well as by the greater role now played by e-commerce."

He added that the overall number of starts in the past year can be labeled healthy but may be close to a peak. In the institutional segment, educational facilities showed strong growth and a number of major transportation terminals broke ground. The public works sector benefited from the 2018 omnibus federal appropriations bill and state transportation bond measures.

"Going forward into 2019, economic growth is not expected to be as strong as what occurred during 2018, which may dampen groundbreaking for multifamily housing and commercial building projects," Murray continued. "In addition, more growth for public works this year requires that federal appropriations for fiscal 2019 get finalized without much further delay."

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November 12, 2019, 5:03 pm PDT

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