Nonresidential construction up slightly in Q1, plummets in March.

Nonresidential construction posted a slight gain during the first quarter of 2008, despite a deep dive in March and a decline in new-construction starts overall, according to New York-based McGraw-Hill Construction's monthly survey of construction starts.

During the first three months of 2008, nonresidential building rose 3 percent to an unadjusted rate of $5.2.7 billion, while total construction for the first quarter came to $121.2 billion on an unadjusted basis--down 19 percent from the same period a year ago, according to Robert M. Murray, McGraw-Hill vice president of economic affairs.

"The lift provided by nonresidential building during the first two months of this year was not present in March," said Murray. "This is consistent with the general pattern expected for nonresidential building, in which the tight lending environment will dampen the volume of commercial projects as 2008 goes on."

For March, overall construction starts fell 8 percent to a seasonally adjusted annual rate (SAAR) of $518.5 billion, while March nonresidential building plunged 23 percent to a SAAR of $206.8 billion, after rising 36 percent in January and February combined.

The first two months of 2008 were boosted by the start of a number of projects each valued in excess of $1 billion, including the World Trade Center Towers 2, 3 and 4 in lower Manhattan, plus the start of large hotel projects in Las Vegas and Atlantic City, New Jersey. The absence of such large projects in March contributed to the overall decline for nonresidential building, said Murray.

"While nonresidential building did fall 23 percent in March from a robust February, it's worth noting that nonresidential building for first-quarter 2008 was essentially steady with fourth-quarter 2007, and up 3 percent compared to first quarter 2007," explained Murray.

Hotel construction in March was down sharply from an exceptional February, falling 67 percent; as was office construction, down from an exceptional February, falling 28 percent, said McGraw-Hill.

The office category received some support in March from the start of the $304 million office portion of the $500 million Russia Wharf mixed-use project in Boston. Other large office projects that reached groundbreaking in March were located in Houston, at $270 million, and Baltimore, at $200 million.

Rounding out the commercial sector, store construction in March fell 18 percent, while warehouses ran counter to this declining trend with a 21 percent gain. Manufacturing-plant construction also had a weak March, dropping 46 percent, according to McGraw-Hill.