By Mark S. Kuhar
At a seasonally adjusted annual rate of $638.3 billion, new construction starts in November retreated 6 percent from October, according to Dodge Data & Analytics. Each of the three major construction sectors experienced reduced activity in November.
Read more: New Construction Starts in November Slip 6 Percent
New construction starts in October decreased 4 percent to a seasonally adjusted annual rate of $678.9 billion, settling back from the elevated amount that was reported in September, according to Dodge Data & Analytics. Nonresidential building retreated from its brisk September pace, which was this sector’s strongest volume so far in 2016.
New construction starts in August soared 21 percent to a seasonally adjusted annual rate of $711.2 billion, according to Dodge Data & Analytics, following lackluster activity in July. The August rise for total construction starts featured an especially elevated amount for nonresidential building, which was helped by the start of a $3 billion petrochemical plant in Louisiana, the $1.7 billion Wynn Casino in the Boston area, and a $508 million terminal upgrade at Seattle-Tacoma International Airport.
Highway and bridge construction in August rose 5 percent.
The nonbuilding construction sector also experienced strong growth, with its public works segment lifted by the start of a $3 billion natural gas pipeline project in the states of Alabama, Georgia and Florida. In addition, residential building contributed with a moderate August gain, reflecting another advance for multifamily housing which included groundbreaking for the $900 million Wanda Vista Tower in Chicago.
“The sharp rise in August makes it likely when September data becomes available that construction starts for the third quarter will be able to register moderate growth, supporting the belief that the construction industry still has room for further expansion despite some recent deceleration” stated Robert A. Murray, chief economist for Dodge Data & Analytics.
“The presence or absence of very large projects, of course, has played a considerable role in the month-to-month pattern for construction starts,” Murray continued. “While July did not receive much of a boost from very large projects, such a boost was clearly present in the August statistics. Furthermore, the year-to-date readings for the first half of 2016 were skewed by the comparison to the heightened first half of 2015, which included 13 projects valued at $1 billion or more, such as a $9 billion liquefied natural gas terminal in Texas, the $2.5 billion 30 Hudson Yards office-retail tower in New York, and the $2.3 billion Interstate 4 highway project in the Orlando area. The number of $1 billion-plus projects entered as construction starts decreased substantially in the second half of 2015, when only three such projects were reported, and another low amount took place in this year’s first half when only four such projects were reported. In August, three projects valued each in excess of $1 billion were entered as construction starts, along with four projects in the $500 million to $1 billion range. This ‘grouping’ of very large projects in August can be attributed to timing issues specific to each project, yet it may also be part of a more general trend reflecting a less hesitant stance by firms towards investment than what was present over the past 12 months.”
Nonresidential building in August surged 42 percent to $267.4 billion (annual rate), rising from the subdued activity reported during the previous four months and reaching the highest amount since April 2015. A substantial boost came from the manufacturing plant category, which climbed 291 percent in August with the start of a $3.0 billion ethane cracker chemical plant in Lake Charles, La. If this massive petrochemical plant is excluded from the August data, the manufacturing plant category would have retreated 44 percent, but nonresidential building would still have been able to register a 23 percent gain.
The commercial categories together advanced 31 percent, supported in particular by the August groundbreaking for the $1.7 billion Wynn Casino in Everett, Mass. Hotel construction climbed 71 percent, reflecting the $465 million estimated for the hotel portion of the Wynn Casino, with additional support coming from other noteworthy projects such as the $180 million Lane Field Intercontinental Hotel in San Diego, Calif., and the $127 million CityCenterDC Conrad Hotel in Washington, D.C.
The commercial garage category advanced 64 percent, helped by the $210 million estimated for the garage portion of the Wynn Casino, as well as by a $128 million parking facility at San Diego International Airport. Warehouse construction strengthened 75 percent, due to the start of a $340 million trade and logistics center as part of the redevelopment of the Oakland Army Base in Oakland.
Office construction improved 3 percent following its 21 percent increase in July, supported by the $194 million office portion of a $300 million bank operations center in Plano, Texas, and a $96 million office building in Herndon, Va. Store construction was the one commercial project type that did not report an August gain, as it held steady with its July pace.
The institutional side of the nonresidential building market increased 24 percent in August. The amusement and recreational category jumped 118 percent, reflecting the $975 million estimated for the casino portion of the Wynn Casino.
Transportation terminal work climbed 30 percent, pushed upward by the start of a $508 million upgrade to the North Satellite Terminal at Seattle-Tacoma International Airport. Educational facilities, which is the largest institutional category, grew 18 percent in August with the lift coming from the start of a $124 million life sciences building at the University of Washington in Seattle and a $118 million high school in the Dallas area.
Healthcare facilities increased 15 percent, featuring five projects valued at $100 million or more, led by a $300 million medical center expansion in St. George, Utah, and a $271 million hospital in Rockford, Ill. The religious buildings category managed to grow 16 percent in August from a subdued July, while the public buildings category (courthouses and detention facilities) fell 11 percent.
Nonbuilding construction, at $152.7 billion (annual rate), increased 25 percent in August. The public works categories together rose 36 percent, with most of the gain coming from a 326 percent hike for the miscellaneous public works category that includes pipeline work.
August featured the start of the $3.0 billion Sabal Trail and Florida Southeast Connection natural gas pipeline upgrade project, which will transport natural gas from Alabama through Georgia and into central Florida. If this massive project is excluded from the August data, the gains for the miscellaneous public works category and the public works group would have been 64 percent and 1 percent, respectively, while nonbuilding construction would have been down 4 percent.
Highway and bridge construction in August rose 5 percent, with major construction starts led by a $163 million tolled express lanes project in Denver and a $110 million realignment of State Route 99 in Fresno, Calif. River/harbor development work in August grew 8 percent, but considerable declines were reported for water supply systems, down 35 percent; and sewer construction, down 43 percent.
The electric utility and gas plant category fell 31 percent in August, weakening for the third straight month, although August did include the start of a $573 million power transmission line in Illinois and a $156 million wind farm in upstate New York.
Residential building in August advanced 5 percent to $291.1 billion (annual rate). Multifamily housing strengthened for the second month in a row, rising 25 percent after its 10 percent gain in July. August featured 13 multifamily projects valued at $100 million or more, led by the $780 million multifamily portion of the $900 million Wanda Vista Tower in Chicago, a condominium-hotel-retail project which at 93 stories will be the third highest building in Chicago when completed.
Other large multifamily projects that reached groundbreaking in August were the $465 million Transbay Block 8 building in San Francisco, the $344 million multifamily portion of a $375 million mixed-use building at 1120 South Grand Avenue in Los Angeles, and the $266 million multifamily portion of the $300 million Miami Worldcenter 7th Street development in Miami.
Through the first eight months of 2016, total construction starts on an unadjusted basis were $439.3 billion, down 7 percent from a year ago. As 2016 is proceeding, the year-to-date decline for total construction is becoming smaller, affected to a lesser extent by the comparison to the massive projects reported during the first half of 2015 and now benefitting from the start of several massive projects in this year’s second half. If projects valued at $1 billion or more are excluded, total construction starts during the first eight months of 2016 would be down a slight 1 percent, or essentially even, with a year ago.
The 7 percent drop for total construction starts on an unadjusted basis during the first eight months of 2016 was the result of declines for both nonbuilding construction and nonresidential building compared to a year ago.
By major region, total construction starts during the first eight months of 2016 showed this performance compared to a year ago – the Midwest, up 5 percent; the South Atlantic, up 4 percent; the West, unchanged; the Northeast, down 12 percent; and the South Central, down 25 percent.
The value of new construction starts in September decreased a slight 2 percent to a seasonally adjusted annual rate of $703.7 billion, according to Dodge Data & Analytics. This follows the 22 percent jump for total construction starts in August, which witnessed the highest monthly pace for construction starts so far in 2016.
Highway and bridge construction in September climbed 17 percent.
Nonresidential building showed further strength in September, exceeding its elevated August amount. The lift for nonresidential building in September came from the start of two very large office towers in New York with a combined construction start cost of $3.5 billion, as well as eight large hospital projects that together summed to $2.2 billion.
However, the housing sector lost momentum in September, pulling back from August, which included groundbreaking for a number of very large multifamily projects. Nonbuilding construction also slipped in September, following its improved August volume that included the start of a $3.0 billion pipeline upgrade in the southeastern part of the nation.
Nonresidential building in September increased 5 percent to $282.3 billion (annual rate), following the 43 percent surge in August which benefitted from the start of a $3.0 billion petrochemical plant in Louisiana and the $1.7 billion Wynn Casino in Everett, Mass. The nonresidential increase in September was led by a 148 percent jump for office construction, which reflected the start of two massive office towers in New York City – the $2.0 billion, 66-story 3 Hudson Yards Boulevard office building on Manhattan’s west side and the $1.5 billion, 67-story One Vanderbilt Tower near Grand Central Station.
September also featured the start of seven additional office buildings each with a construction start cost of $100 million or more, including the $280 million design center at the Ford Motor Co.’s Dearborn, Mich., office campus, the $209 million Four Constitution Square office complex in Washington, D.C., and the $178 million Oracle Corporation office campus in Austin, Texas.
Store construction also strengthened in September, rising 31 percent and helped by the start of a $150 million mall expansion in Staten Island, N.Y. On the negative side, hotel construction in September retreated 30 percent after its substantial August gain, although September did see groundbreaking for the $123 million Ritz Carlton Hotel in Paradise Valley, Ariz.
Commercial garages and warehouses experienced respective declines of 20 percent and 17 percent in September. As a group, the commercial categories in September registered a 37 percent increase, after the 31 percent gain reported in August. The improved levels for commercial building in August and September followed a lackluster amount of construction starts during the previous four months. The manufacturing plant category in September dropped 84 percent, after being boosted in August by the $3.0 billion petrochemical plant in Louisiana.
The institutional side of the nonresidential building market advanced 8 percent in September. Much of the lift came from a strong volume for healthcare facilities, which climbed 57 percent. There were eight healthcare facilities valued each at $100 million or more that reached groundbreaking in September, with the two largest being a $756 million healthcare facility complex in Loma Linda, Calif., and the $500 million Vassar Brothers Medical Center patient pavilion in Poughkeepsie, N.Y.
New education facility projects grew 4 percent in September, helped by three large college/university science buildings – a $175 million science center at Amherst College in Amherst, Mass., a $120 million engineering and sciences facility at Texas State University in San Marcos, Texas, and a $115 million biomedical sciences and engineering facility at the University of Maryland in Rockville, Md.
For the smaller institutional categories, gains were reported in September for public buildings, up 10 percent; and religious buildings, up 40 percent from weak activity in August. Amusement construction starts were down 32 percent from August which included $975 million for the casino portion of the Wynn Casino, although September did see groundbreaking for the $486 million Milwaukee Bucks basketball arena in Milwaukee. Transportation terminal work in September was down 8 percent, although the latest month did include the $442 million Terminal 1 Center renovation at San Francisco International Airport.
Residential building, at $271.1 billion (annual rate), fell 8 percent in September. Multifamily housing retreated after a strong performance in August, falling 17 percent. While August included 13 multifamily projects valued each at $100 million or more, there were only five such projects that reached groundbreaking in September, including a $225 million multifamily building in Seattle and a $145 million multifamily building in Milwaukee.
Single-family housing in September dropped 4 percent, slipping back slightly from the plateau that’s been present for much of 2016. By geography, single family housing in September showed weaker activity in the South Atlantic, down 9 percent; the South Central and West, each down 2 percent; the Midwest, down 1 percent; while the Northeast was unchanged from August.
Nonbuilding construction in September dropped 2 percent to $150.3 billion (annual rate). Pulling the nonbuilding total down was a 72 percent plunge for the “miscellaneous public works” category, which includes such diverse project types as pipelines, mass transit, and site work. The August amount for this category had been boosted by the start of the $3.0 billion Sabal Trail and Florida Southeast Connection natural gas pipeline upgrade project, which will transport natural gas from Alabama through Georgia and into central Florida.
By contrast, the largest miscellaneous public works project reported as a September start was a $244 million landfill project in Staten Island, N.Y. The environmental public works categories in September were mixed, with weaker activity for sewers, down 23 percent; but growth for river/harbor development, up 16 percent; and water supply systems, up 20 percent.
Highway and bridge construction in September climbed 17 percent, aided by the start of a $916 million segment of the Loop 202 (South Mountain Freeway) project in the Phoenix area. Also starting in September was the $221 million Port Access Road in the Charleston SC area.
New electric utility starts jumped 219 percent in September from a subdued August. Large electric utility projects that contributed to September’s increase were a $1.3 billion natural gas-fired power plant in Virginia, a $600 million power plant coal burner replacement in Minnesota, and a $417 million wind farm in Illinois.
Through the first nine months of 2016, total construction starts on an unadjusted basis were $506.7 billion, trailing the same period a year ago by 3 percent. The decline for total construction starts on an unadjusted basis during the first nine months of 2016 was due to a mixed pattern by major sector.
By geography, total construction starts during the January-September period of 2016 revealed these changes compared to the same period a year ago – the Midwest, up 9 percent; the South Atlantic, up 7 percent; the West, up 5 percent; the Northeast, down 5 percent; and the South Central, down 22 percent (reflecting this region’s comparison to last year which included several massive liquefied natural gas export terminals).
“Whether looking at construction starts month-to-month or quarter-to-quarter, the past two years have shown considerable volatility, reflecting in part when very large projects were entered as construction starts,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The first two quarters of 2015 included 13 very large projects valued each at $1 billion or more, followed by only one such project in last year’s third quarter. The current year has assumed a ‘mirror image’ quality with respect to the timing of very large projects – only four were entered as construction starts during this year’s first two quarters, but in the just completed third quarter six such projects were entered as construction starts. When combined with the more broad-based strengthening for construction that’s taken place in this year’s August and September, and with the comparison to the subdued activity for the same two months a year ago, the year-to-date shortfall for total construction starts has become considerably smaller than what was reported earlier in the year.
“While the year-to-date percent change for total construction starts at the 7-month mark was initially reported as down 11 percent, at the 8-month mark it was down 7 percent and at the 9-month mark it was down just 3 percent,” Murray continued. “Furthermore, if the volatile electric utility/gas plant category is removed from the year-to-date comparison, total construction starts would be flat with last year. Increasingly, it appears that 2016 is shaping up as a year when the overall level of construction starts is essentially holding steady. This is being supported by such economic factors as moderate job growth, generally healthy market fundamentals for commercial real estate, and the funding coming from state and local bond measures that have been passed in recent years.”
At a seasonally adjusted annual rate of $586.3 billion, new construction starts in July fell 2 percent from the previous month, according to Dodge Data & Analytics. A steep drop by electric utilities pulled down the nonbuilding construction sector, which in turn contributed to the slight decline for total construction starts.
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