McGraw Hill Construction

Commercial Construction Momentum Slipped in June after Six Months of Increases

The Dodge Momentum Index slipped in June for the first time in six months, according to McGraw Hill Construction.

The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

After six consecutive monthly increases, the Momentum Index in June slipped 1.5% to 113.8, down from a revised reading of 115.5 for May. The June pause came after May produced the highest level for the Momentum Index since March 2009, and indicates that the rising trend for nonresidential building remains subject to the occasional setback. As shown by such market fundamentals as vacancy rates, the commercial building sector is getting healthier, but the improvement continues to occur at a gradual and hesitant pace.

The June Momentum Index revealed a mixed reading for its two major components, as a sharp increase in plans for institutional buildings offset a drop in commercial development.

New plans for institutional buildings rose 6.5% in June, bolstered by several amusement-related projects. Among the larger amusement and leisure developments to enter planning in June were the $250 million Monarch Hotel and Casino in Black Hawk CO and a $200 million expansion of the Sacramento Convention Center inCalifornia.

The largest institutional project overall to enter the planning phase in June was a $400 million casino project in Liberty, NY. The developer of the casino has said that the site in upstate New York could be ready for construction soon if the necessary state and local approvals are expedited.

Meanwhile, the commercial building segment in June fell back 8.5% compared to May. Declines in both office and retail-related development weighed on overall commercial building plans.

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