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AGC's Data DIGest: April 14 – 18, 2014

State employment data, Beige Book find widespread increases; starts dip, Reed says

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Seasonally adjusted construction employment increased in 38 states between March 2013 and March 2014, decreased in 11 states and the District of Columbia, and remained level in Alaska, an AGC analysis of Bureau of Labor Statistics (BLS) data released Friday showed. The largest percentage gains were in Florida (11%, 41,000); Oregon (11%, 7,800); and Minnesota (10%, 10,200). Florida also led in number of jobs added, followed by California (37,100, 5.9%) and Texas (17,100, 2.8%). New Jersey lost the most construction jobs (-4,600, -3.4%), followed by Kentucky (-1,900, -2.8%) and West Virginia (-1,700, -4.9%). The steepest percentage losses over the year occurred in West Virginia, New Jersey and D.C. (-2.9%, -400). For the month, 24 states and D.C. added construction jobs, while 23 states lost jobs and three held steady: Montana, South Dakota and Wyoming. North Dakota added the highest percentage of new construction jobs between February and March (3.4%, 1,100 jobs), and Ohio added the most jobs (4,600, 2.5%). Louisiana was second in both rankings (3.3%, 4,200). New Mexico experienced the largest percentage decline for the month (-4.2%, -1,800 jobs), and Texas lost the most construction jobs (-5,300, -0.8%). Extreme weather in February and/or March contributed to unusually large 1- and 12-month swings in many states. (BLS combines mining and logging with construction in D.C., South Dakota and five other states to avoid disclosing data for industries with few firms.)

Informal soundings of businesses in the 12 Federal Reserve districts “suggest economic activity increased” between late February and early April in all districts except Chicago and St. Louis, the Fed reported on Wednesday in the latest “Beige Book.” The districts are referenced by the name of their headquarters cities. Residential construction increased in several districts; only Cleveland, St. Louis and Minneapolis reported a decrease…. Multifamily construction remained strong in the New York, Richmond, Atlanta, Chicago, Dallas and San Francisco districts. …Commercial construction activity strengthened since the previous survey period for the Kansas City and Dallas districts. The Richmond, Atlanta, Chicago, St. Louis, Minneapolis and San Francisco districts reported modest to moderate expansion in commercial construction. Philadelphia noted mild growth, while Cleveland reported a slight decline in commercial construction....Cleveland, Atlanta, Chicago, Kansas City, Dallas and San Francisco districts all said that prices of metals, brick and cement rose modestly….Prices of various categories of construction materials rose in some districts; in Cleveland, concrete, drywall and hardwood prices all trended higher. The Kansas City district indicated that drywall and roofing prices rose and were expected to rise further. In San Francisco, wood and insulation prices edged up.”

The value of nonresidential construction starts in the first quarter of 2014 fell 2.9% compared with the same period in 2013, Reed Construction Data reported on Thursday, based on data it collected. Nonresidential building starts slumped 12%, as commercial starts plunged 24% but institutional starts climbed 7.2%. Heavy engineering starts jumped 16%.

Housing starts rose 2.8% at a seasonally adjusted annual rate in March from February but slipped 3.9% compared with March 2013 levels, the Census Bureau reported on Wednesday. Because severe winter weather in many areas may have distorted starts this year, comparing the first three months combined may give a more accurate picture of underlying trends. Starts in the first quarter of 2014 dipped 2.4% compared to January-March 2013, with single-family starts down 1.6% and multifamily (buildings with 5 or more units) down 2.9%. Building permits, a fairly reliable indicator over time of future starts, rose 6.7% year-to-date in the first quarter, with single-family permits flat and multifamily permits up 22%.

“While medical office still accounts for 25% of all U.S. office space under construction, ground-up construction has decreased in recent years, in part because of the efficiencies available from converting non-traditional properties, especially big-box stores and suburban shopping centers,” the CoStar WatchList e-newsletter reported last Monday. “‘We’re seeing a lot of strip centers being converted to medical offices of various sizes, if a dollar store or grocery store goes out,’ Robert Moon, vice president, brokerage services, for Farmington Hills, MI-based Friedman Integrated Real Estate Solutions, tells CoStar News.” New medical office buildings (MOBs) “‘can cost upwards of $200 a foot to development--those are big numbers. Existing space at a retail center will be substantially less than that, so there’s a big incentive to take that space rather than building from the ground up.’ [Many health care facilities] are increasingly moving away from the centralized service delivery model centered on a traditional hospital campus and trending toward mixed-use properties where [MOBs] and retail stores and restaurants co-exist, according to Laura Lee Garrett, a partner with Hirschler Fleischer in Richmond, VA.” Family Dollar announced on April 10 by that it “will close approximately 370 underperforming stores.” That may add to the space available for conversion, though such stores often occupy smaller, less-desirable sites than the “well-located big box properties in the 20,000-to-50,000 square-foot range with ample parking, [that] have been an especially popular draw for many medical tenants” cited by CoStar.

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at www.agc.org/datadigest.

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