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Construction News

New Numbers Reveal Builders' Contrasting Fortunes

11/5/2020

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An unprecedented gap between residential construction growth and a lack of it in the nonresidential section is proving stubbornly steady, according to a new study released by the Associated General Contractors of America.

“The September spending report shows the gulf between housing and nonresidential markets is growing steadily wider,” Ken Simonson, chief economist with the AGC, said in a statement.

While residential projects have increasingly picked up steam in the late summer and early fall weeks, some 75% of nonresidential respondents are reporting a postponed or outright cancelled project.

Those numbers, notes Simson, are “up from 60% in August and 32% in June.”

Altogether, construction spending was up by 0.3% in September over the August numbers, for a total of $1.4 trillion. That figure was surprisingly 1.5% greater than September 2019’s numbers.

Private residential spending continues to prove the real star of the national building business with a 2.8% increase in September, and a 9.9% gain over last September.

The numbers are all in the other direction in private and public nonresidential spending, which saw a 1.6% decline between August and September of this year, and a 4.4% drop from September 2019.

Private nonresidential construction, in fact, has been down for three months in a row, with the sharpest reduction at 2.2% seen in the power construction segment.
Commercial construction, taking in retail and warehouse work, was off by just under 2%, while manufacturing work dropped 2.1%.

In the public construction arena, highway and street construction, often the most resilient sector, saw a significant 5.4% drop in September, with transportation building off by a smaller 0.3%.

Stephen Sandherr, chief executive officer of the AGC, pointed to the effects of the pandemic for “suppressing demand for new office buildings, hotels, and shopping centers even while it inspires many people to build bigger homes.”

Despite the strong residential construction numbers, Robert Dietz, chief economist with the National Association of Homebuilders, noted that new building continues to lag behind new home sales.
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“Combined with the low level of inventory at a 3.6-month supply, the September data indicate growth opportunities for home building,” said Dietz in a press release, adding that the NAHB’s latest survey reveals that home builder confidence has reached “a new, all-time high.”

By Garry Boulard

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