Construction spending fell in January, Census says, but Reed reports jump in starts
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Construction spending in January totaled $883 billion at a seasonally adjusted annual rate, down 2.1% from December but up 7.1% from January 2012, the Census Bureau reported last week. The November and December totals were each revised up by over $15 billion, reflecting a surge in power construction as contractors rushed to finish wind energy projects to qualify for tax credits by yearend. Private residential construction spending was flat for the month and up 22% from January 2012. Private nonresidential spending slumped 5.1% from December but rose 4.0% year-over-year. Public construction spending fell 1.0% for the month and 3.0% year-over-year. New single-family construction rose 3.6% and 30%, respectively. New multifamily spending rose 1.7% and 55%. Of the top three private nonresidential categories, spending on power construction (including oil and gas fields and pipelines) fell 14% and 2.7%; manufacturing construction fell 2.9% for the month but rose 13% year-over-year; and commercial construction (retail, warehouse and farm) edged up 0.6% and 3.0%.
The value of nonresidential construction starts in January soared 25% from January 2012, Reed Construction Data reported on February 22, based on data it compiled. Nonresidential building starts increased 20%, as industrial (manufacturing) starts more than tripled; institutional starts climbed 27%; and commercial building starts inched up 0.5%. Heavy engineering starts jumped 38%.
Banks “throughout the country are showing a greater appetite for real-estate risk,” the Wall Street Journal reported on Wednesday. “Commercial real-estate loans on banks’ books grew by about $14 billion to $1.51 trillion during the fourth quarter, according to data released by the Federal Deposit Insurance Corp. on Tuesday. That is the largest increase in years. ‘There’s been improvement over the last couple years, but really, it’s just within the last quarter that the overall sector has been turning,’ said Matthew Anderson, managing director at loan research service Trepp LLC.”
"Housing for college students…is attracting some of the biggest names in real-estate development,” the Journal reported on Wednesday. In February, Lennar Corp. “broke ground on its first off-campus apartment community near the University of Texas at Austin. Toll Brothers Inc….plans to build upscale student housing…totaling about 3,000 beds. [Brandywine Realty Trust] recently teamed up with Campus Crest Communities Inc. to build a 33-story tower in Philadelphia that will serve students from several schools. [The] companies are ramping up construction at time when college-student enrollment has slipped…But the companies maintain that over the long term, enrollment will continue to rise, especially at large state schools where much of the construction is taking place. [Most] colleges and universities don’t have enough beds to go around. American colleges are short a total of between 1.5 million and 2.15 million beds, according to research from consultant Michael Gallis & Associates. Moreover, many colleges and universities lack the funds to upgrade current dormitories or build new ones and are relying on the private sector to fill the gap.”
More broadly, however, “The outlook for higher education [is] negative,” Jason Lane, director of education studies at the Rockefeller Institute of Government, wrote in February. “At least that is according to a new report from Moody’s suggesting that all higher education institutions, including the market-leading elites, are going to be facing significant fiscal pressures in the coming decade. [A recent report produced by the Western Interstate Commission for Higher Education,] Knocking at the College Door, indicates that the number of high school graduates will decline in the coming two decades, particularly in the Northeast, and many colleges and universities are going to struggle to maintain their share of high-school graduates. The data suggest that the number of high-school graduates peaked nationally in the 2010-2011 academic year with about 3.4 million graduates. The number is then predicted to decline until 2013-2014, before stabilizing between 3.2 and 3.3 million until 2020-2021. At that point the number of graduates is anticipated to increase, but not returning to the peak experienced two years ago. The national picture described above is not great, but it masks important regional trends. In the South, the most populous region in the country, the number of high school graduates in 2027-2028 is projected to be 8% larger than it was in 2008-2009. This situation is much more dire for the Northeast, [where] the number of high-school graduates is expected to decline by 10% between 2009 and 2028….Moreover, investment by state government in higher education is shifting. The annual Grapevine report by Illinois State University and the State Higher Education Executive Officers shows that state support for higher education declined 10.8% between FY 2008 and FY 2013 (with decline happening each year).” However, governors in New York and Massachusetts have called for more spending on state university infrastructure, and “In Connecticut, Governor Dan Malloy has proposed that the state would issue $1.5 billion in bonds to invest in the Science, Technology, Engineering and Mathematics infrastructure at the University of Connecticut’s three campuses.”
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