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Report: Nonresidential contracts drop in February

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McGraw-Hill Construction reported Wednesday year-over-year drops for February in contracts for future construction in the metropolitan statistical area of San Diego-Carlsbad-San Marcos, including a steep drop in nonresidential permits.

The declines occurred in both the residential and nonresidential sectors, according to the report. Nonresidential construction includes all commercial building along with nonresidential alterations and additions.

There was a 94 percent decline in February, as compared to the same month a year earlier, to $9.92 million for nonresidential construction. The same month in 2012 produced contracts totaling $175.2 million.

Declines on the residential side were more modest, with permit totals for residential construction dropping by 9 percent in February as compared to a year earlier, from $52.8 million in February 2012 to this February’s total of $48.18 million.

Despite the poor monthly showing, in year-to-date numbers through February, nonresidential contracts for future construction are still up 30 percent compared to 2012, reflecting the strong numbers from January.

Last month, McGraw-Hill reported that January nonresidential permits more than doubled January 2012’s value of $216.1 million, ending the month with $497.33 million in contracts.

But the general feeling from Tom Brown, president of the general contracting firm Sierra Pacific West Inc., is that the February decline is more indicative of the trend.

Going back farther than the overall 30 percent year-to-date numbers for non-residential, a year-over-year monthly decline was also posted in December 2012, when activity was 64 percent down from the year before, settling at $40.1 million.

The large declines in two of the last three monthly reports are what Brown, whose company deals heavily with public works projects, said he's experiencing.

"We are down," Brown said, discounting the two month's worth of year-to-date figures. "We are down dramatically. Infrastructure building in the public sector is dramatically down, and it's because of the funding that isn't [there]. In other words, Caltrans isn't being funded enough money; the state is not filtering the money down to the local agencies.

"Probably, in a more global picture, we're not getting the financial support from the federal administration like we have in the past," he said, pointing to the recent passing of the highway funding reauthorization bill, adding that it just doesn't provide enough money to go around.

The year-to-date analysis in the residential sector shows a 36 percent overall decline from 2012.

The sector posted a January year-over-year drop of 41 percent, with nearly $73.38 million in permits pulled in January compared to the $125.19 million pulled in January 2012.

Last year ended well for the residential side, as December 2012 permits rose 41 percent to $108.9 million, as compared to the $77.5 million in December 2011 permits.

Brown said that despite the reported declines in February and January, the environment for residential building seems to be improving, especially when looking at how modest the February decline was compared to the January decline, and combining that with the uptick last December.

But he maintained that the February snapshot of nonresidential contracts seems to be most indicative of what's going on.

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