Nonresidential construction posted a modest increase in 2007 compared with a year earlier, even as total construction for the same period fell to a 15-year low, according to New York-based McGraw-Hill Construction's survey of construction starts.

For 2007 as a whole, nonresidential building climbed 3 percent to $221 billion, which followed an 18 percent increase in 2006. By contrast, total construction for the full year came in at $611.2 billion in 2007, down 11 percent from 2006 and marking the first annual decline for the construction start series since 1991.

The weakness reflected the steep correction for housing over the course of 2007; excluding residential building, new-construction starts for the full year 2007 advanced 3 percent, explained Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

"Like 2006, the pattern for total construction in 2007 was shaped by the single-family correction, which grew even more pronounced with the turmoil in the financial markets caused by the subprime mortgage meltdown," said Murray. "The weakness spread over to multifamily housing in 2007, but for much of last year the commercial and institutional structure types held up fairly well."

The picture began to change for commercial building toward the end of 2007, and the continued presence of a slowing economy and tighter lending standards will contribute to an expected decline for commercial building in 2008, Murray added.

Meanwhile, multifamily housing construction for all of 2007 was down 16 percent in dollar volume and 20 percent in dwelling units. The top-five markets for multifamily housing in 2007, ranked by dollar amount of new-construction starts, included three with large declines relative to the prior year: New York City, down 31 percent; Los Angeles, down 27 percent; and Miami, down 57 percent.

At the same time, said McGraw-Hill, two of the top-five markets showed gains relative to 2006: Chicago, up 7 percent; and Las Vegas, up 60 percent.

The 2007 annual total for residential building was $260.2 billion, down 24 percent from 2006, while single-family housing plunged 26 percent in dollar volume and 30 percent in dwelling units.

"In 2006, single-family housing was hit hard by the loss of investor-led demand, and in 2007 the negative factors broadened to include sharply diminished mortgage availability and the precarious financial position of housing developers," said Murray. "With the inventory of unsold homes at high levels, further reductions for single-family housing lie ahead."

Broken down by sector, store construction within the commercial segment continued to be very strong, in 2007 rising 11 percent in dollar volume, due to the ongoing expansion efforts of major retailers.

"To this point, store construction has withstood any downward pull from the weaker housing market, but that's expected to change in 2008," said Murray.

Warehouse construction also increased in 2007, rising 6 percent even as office construction, while down a slight 1 percent, essentially maintained the improved pace established in 2006 when contracting jumped 44 percent, according to McGraw-Hill.

The top-five markets for office construction starts during 2007, in dollar terms, were: New York; Washington, D.C.; Atlanta; Chicago; and Charlotte, North Carolina.

Like offices, the hotel category reported a modest decline for construction starts, down 7 percent, although this followed a 92 percent surge in 2006. Las Vegas maintained its top ranking in 2007 as the leading metropolitan area for hotel construction starts, while down from its exceptional 2006 amount, said McGraw-Hill.

Other markets in the top-five for hotel construction in 2007 were Los Angeles; Chicago; Orlando, Florida; and Washington, D.C.