CIRB: State Construction Up for Fifth Consecutive Month.

Business Editors/Real Estate Writers

BURBANK, Calif.--(BUSINESS WIRE)--June 30, 2003

For the fifth consecutive month, California's statewide construction volume continues on the rise with May figures totaling $6.32 billion, up 5.4 percent from the previous month and up 10.6 percent from May 2002.

However, industry leaders and analysts are waiting for the construction bubble to burst, slightly, and for "the other shoe" to drop. Fiscal constraints due to the still unresolved state budget deficit are beginning to show significant declines even though some monthly figures are on the increase. According to statistical data compiled by the Construction Industry Research Board (CIRB) year-to-date figures reveal the weakest construction sector is heavy-highway construction which is down 34.4 percent after five months of 2003. Within that sector the roads and bridges category, directly affected by pending state contracts facing cancellation or longer delays, is down a whopping 49.6 percent. And there still remains seven months of construction for 2003.

Executive Director Tony Grasso of the Associated General Contractors of California says general contractors have mobilized opposition to a proposed $1.1 billion in transportation budget reduction by Governor Davis and the Legislature as a means to help balance the state budget. Grasso says the campaign "Stop the Highway Robbery" is intended to reinforce the intent of the 69 percent voters that approved passage of Proposition 42 that required over $1.2 billion annually from state sales tax on motor fuels to be used for transportation purposes only. The bottom line is industry leaders like Grasso understand that any highway projects in place will continue but no new projects will be awarded. This could mean at least a 30 percent loss of activity "at least for a year or maybe two."

CIRB is forecasting heavy construction to total $7.63 billion for 2003, down 15.3 percent. Public works construction, which includes both highway-heavy construction and public buildings (government owned),totals $6.79 billion statewide in the first five months of 2003, down 0.2 percent from the same period last year. Public buildings construction is up 54.0 percent to date, mostly due to school construction increases, but the declines in heavy construction offset the increases.

The other sector that continues to show negative results after the first five months of 2003 is private nonresidential (commercial) building. Year-to-date figures total $5.49 billion, down 5.1 percent from the same period last year. Analysts point out the Bay Area Region continues to account for the bulk of the decline. CIRB is forecasting nonresidential construction to total $13.83 billion in 2003, down 4.8 percent from 2002. Year-to-date private building construction, which includes both residential and nonresidential construction, totals $21.28 billion, up 13.9 percent. Residential construction increased 22.5 percent during this period thus offsetting the 5.1 percent loss registered by nonresidential during the first five months of 2003.