Housing Starts Spike, Commercial Contracting Continues Decline in 1st Quarter

Permits for single family detached homes spiked steeply during the first quarter of 2010 in metropolitan Pittsburgh, mirroring the pattern that is developing nationally. “It’s tempting to look at this increase in volume as the first signs of a turnaround, but we have to remember that the activity level is still about half what has been normal for the past 15-20 years,” warns Jeff Burd, president of Tall Timber Group, who conducted the research.
During the January through March period 376 permits were issued for single-family detached units, up 48% from the same period last year. Attached unit permits declined almost as steeply, with 138 units started compared to 241 during the first quarter of 2009. The overall housing construction market was up 3.8%, however, the first increase in almost two years.
Residential market conditions are improving and there are some multi-family projects in the pipeline for the first time in several years, probably in response to the rental demands from Marcellus Shale firms and the availability of financing for these projects ahead of other segments of the market. Tall Timber Group forecasts that the multi-family and attached sector will catch up to 2009 levels by the third quarter, and sees single-family detached volume as improving year-over-year at a more subdued level than the first quarter, forecasting a 30% increase for the full year.
Non-residential construction was down almost 27% from last year, but contracting volume was higher than expected given the slowdown in design commissions during the spring/summer of 2009. Contracting during January-March was $371 million, down from $471.5 million in 2009. As expected, publicly funded construction made up the bulk of the volume, and competitive pressures continue to bring pricing down on bids.
Tall Timber still forecasts around $3 billion in construction for 2010, although roughly one-third of that will come from upgrades at two steelmaking facilities, the AK Steel plant in Butler and the USS Clairton Coke Works. Pure commercial development remains depressed by lower demand and continued difficulty in obtaining favorable financing. “March did bring some good signs that the ‘new economy’ sectors – especially energy and healthcare – were beginning to generate higher space demand; and while financing conditions are still tough it has become clear that the dry powder of cash is starting to look at real estate again,” says Burd.

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