The value of new construction starts edged up 1 percent 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 nonbuilding construction (public works and utilities). For all of 2000, total construction advanced 3 percent 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 percent increase for total construction in 2000 compares to the 10 percent 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. "The slowing economy and tighter lending conditions in 2001 will make it difficult for the construction industry to see yet another year of expansion. At the same time, there's a strong likelihood that construction will be able to remain close to the elevated volume achieved in 2000. While some weakening is expected for single family housing and commercial building, the public works sector should see further growth due to increased federal funding, and institutional building will remain healthy - given the continued strength of school construction."

Nonresidential Building

For the full year 2000, nonresidential building retreated 1 percent to $167.5 billion, reflecting a mix of pluses and minuses by structure type.

Of the major categories, school construction climbed 8 percent, spurred by a growing volume of high school, college and university projects. Office construction grew an additional 4 percent. Murray noted, "The recent strength of office construction should result in some upward movement for vacancy rates in 2001. Vacancy rates are still low by historical standards and the fact the office market is not facing a glut of space means any decline in construction should stay limited."

Other nonresidential categories showing growth in 2000 included amusement-related projects, up 13 percent, reflecting the continued strength for sports arenas, as well as a surge of convention center projects.

Warehouse construction climbed 11 percent, 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 percent from a robust 1999, while hotel construction continued the prior year's retreat by falling 9 percent.

Healthcare facilities and public buildings in 2000 were each down 11 percent, while manufacturing plant construction plunged 23 percent.

Residential Building

For all of 2000, residential building climbed 5 percent to $205.1 billion, aided by a 7 percent increase in the dollar volume of single family housing (as higher homebuilding costs outweighed a 5 percent decline in dwelling units). Multifamily housing in 2000 slipped back 3 percent, following the prior year's 12 percent gain.

Murray stated, "Singe family housing in 2001 will be dampened by slower income growth and ebbing confidence levels, but the decline will be eased to some extent by the recent improvement in the cost of financing, as the 30-year mortgage rate has settled back to 7 percent." In terms of geography, residential building in 2000 registered this pattern: The West, up 8 percent; the South Atlantic, up 6 percent; the Northeast, up 5 percent; the South Central, up 3 percent; and the Midwest, up 2 percent.

Nonbuilding Construction

For the full year 2000, nonbuilding construction increased 6 percent to $87.9 billion. Highways and bridges climbed 13 percent, following the 11 percent 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 percent, while only slight gains were reported for water supply systems, up 1 percent; and sewers, up 2 percent. Murray stated, "Even with a slower economy, the public works sector is virtually assured of seeing continued growth, given the 16 percent increase in the federal-aid highway program that Congress approved for fiscal 2001."

Contracting for electric power plants in 2000 continued to strengthen, rising 27 percent after the 174 percent 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 percent gain, as this region witnessed especially strong increases for its nonresidential building and public works sectors. The West reported a total construction pickup of 6 percent, and the South Atlantic advanced 5 percent. The other two regions reported declines for total construction in 2000 - the South Central, down 2 percent; and the Midwest, down 3 percent.