Construction contracts rise one percent in December.

The value of new construction started to edge up 1% in December to a seasonally adjusted annual rate of $456.3 billion, according to the F.W. Dodge division of The McGraw-Hill Companies. A surge of nonresidential building offset declines for residential building and non-building construction (public works and utilities). For all of 2000, total construction advanced 3% to $460.6 billion, marking the ninth straight year of expansion.

December's data lifted the Dodge Index to 181, compared to a revised 180 for November. The Dodge Index had averaged 185 during the first half of 2000, before losing momentum in July and August. The final months of the year show the Dodge Index essentially leveling off just below its full year reading of 183. "The 3% increase for total construction in 2000 compares to the 10% gains averaged during the 1997-99 period, so the rate of growth for the construction industry has clearly subsided," stated Robert A. Murray, vice president of economic affairs for F.W. Dodge.

Nonresidential building in December jumped 14%, with sharp increases reported for most of the commercial categories. Hotel construction surged 146% following a very weak November, boosted by the start of a $125 million resort in Phoenix and a $70 million hotel renovation in Chicago. Office construction climbed 29%, aided by major projects of at least $70 million in San Jose, CA, Austin, Texas, Seattle, WA, and Stamford Conn. Warehouses, up 23%, also contributed to December's nonresidential rebound. Several institutional categories showed more moderate growth -- public buildings (courthouses and detention facilities), up 15%; healthcare facilities, up 14%; and schools, up 5%. Nonresidential structure types that lost momentum during December included manufacturing buildings, down 2%; stores and shopping centers, down 4%; churches, down 12%; and amusement-related projects, down 24%.

For the full year 2000, nonresidential building retreated 1% to $167.5 billion, reflecting a mix of pluses and minuses by structure type. Of the major categories, school construction climbed 8%, spurred by a growing volume of high school, college, and university projects. Office construction grew an additional 4%, with dollar volume gains reported in such cities as Boston, San Jose, Seattle, Phoenix, and San Francisco. Murray noted, "The recent strength of office construction should result in some upward movement for vacancy rates in 2001. Yet, vacancy rates are still low by historical standards, and the fact that the office market is not facing a glut of space means that any decline in construction should stay limited." Other nonresidential categories showing growth in 2000 included amusement-related projects, up 13%, reflecting the continued strength for sports arenas, as well as a surge of convention center projects in such cities as Washington, DC, Boston, and Orlando, Fla. Warehouse construction climbed 11%, boosted by the recent strength for store construction and growing demand for "telecom hotels" that house communications and Internet-related equipment.

Nonresidential categories that lost momentum during 2000 included stores and shopping centers, down 6% from a robust 1999, while hotel construction continued the prior year's retreat by falling 9%. Healthcare facilities and public buildings in 2000 were each down 11%, while manufacturing plant construction plunged 23%.

Residential building in December dropped 7%. Single family housing was down 12%, while multifamily housing cushioned the residential retreat by jumping 26%. Single family housing had a strong start in 2000, but moderately lower activity was reported from the spring through the end of the year. For all of 2000, residential building climbed 5% to $205.1 billion, aided by a 7% increase in the dollar volume of single family housing (as higher homebuilding costs outweighed a 5% decline in dwelling units). Multifamily housing in 2000 slipped back 3%, following the prior year's 12% gain. In terms of geography, residential building in 2000 registered this pattern -- the West, up 8%; the South Atlantic, up 6%; the Northeast, up 5%; the South Central, up 3%; and the Midwest, up 2%.

Non-building construction receded 4% in December. Highway and bridge construction bounced back 24% from a weak November, but reduced contracting was reported for the environmental public works categories -- water supply systems, down 10%; river/harbor development work, down 22%; and sewer systems, down 35%. Construction of electric utilities fell 24% in December, sliding from its exceptional pace of the prior seven months.

For the full year 2000, non-building construction increased 6% to $87.9 billion. Highways and bridges climbed 13%, following the 11% gain in 1999, as the enhanced funding from 1998's Transportation Equity Act for the 21st Century continues to provide support. The environmental public works categories did not see similar growth in 2000--river/harbor development work was down 7%, while only slight gains were reported for water supply systems, up 1%; and sewers, up 2%. Contracting for electric power plants in 2000 continued to strengthen, rising 27% after the 174% surge in 1999. Power plant construction in 2001 is expected to remain at a high level, given capacity shortages in numerous states.

The full year 2000 figures for total construction showed a varied performance by region. Leading the way was the Northeast with a 10% gain, as the region witnessed especially strong increases for its nonresidential building and public works sectors. The West reported a total construction pickup of 6%, and the South Atlantic advanced 5%. The other two regions reported declines for total construction in 2000 -- the South Central, down 2%; and the Midwest, down 3%.