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ATLANTA-The national credit freeze is having a chilling effect on commercial construction starts, according to locally based Reed Construction Data. Contract values this year through October totaled $242.7 billion, down 2.5% from the first 10 months of 2007.

Construction starts in October alone were down 14% overall from September, yet were up 11% from last October. “It is very clear in the month-to-month change in starts for private commercial properties that were expected to be hit first and hardest by the credit access and cost problems,” Jim Haughey, chief economist for Reed Construction Data in suburban Norcross, stated in the latest Construction Industry Snapshot.

Construction starts for private offices, retail buildings, warehouses and hotels dropped 38% in October from the previous month, to their lowest level since early 2004, Haughey said. The four private commercial markets accounted for three quarters of the month-to-month decline, he added.Manufacturing facilities and nursing homes accounted for the other 25% of the October decline. These are also private markets that get construction funds from financial markets, Haughey said.

“The worsened economic outlook stemming from the credit freeze will catch up with the rest of the construction markets,” Haughey said. He noted that state and local government tax receipts are abruptly lower, while values of investment funds used to finance public and institutional construction have declined 20% to 30%.

“Construction cutbacks have been announced or soon will be announced by many facilities managers, which will depress starts by the end of this year and the early part of next year,” Haughey said. General contractors are seeking other types of non-traditional projects, such as educational and religious facilities, in order to maintain payrolls and revenue.

“Higher education seems to have burgeoning needs impacted by the boom in high school graduates just starting and the typical condition where a declining jobs market drives more people to extend their education,” Bill Pinto, president of Atlanta-based Hardin Construction Co. LLC, tells GlobeSt.com. However, he adds that this segment is being restrained by both the bond market and reduced sales tax collections in many states.

Among the biggest decliners in year-to-date values of US construction starts are warehouses, down 32% to $2.3 billion; retail, down 22% to $21.2 billion; and hotel/motel, down 16% to $9.7 billion, according to Reed Construction Data. Gainers this year through October include government offices, up 85% to $5.1 billion; laboratories, up 20% to $3.2 billion; and parking garages, also up 20% to $2.3 billion.

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