The value of new construction starts in September dropped 5 percent from the previous month to a seasonally adjusted annual rate of $523.7 billion, according to Dodge Data & Analytics. Decreased activity was reported for both nonresidential building and housing, while the nonbuilding construction sector managed a partial rebound after its August decline.
Highway and bridge construction rose 1 percent
“The level of construction starts was subdued during both August and September, retreating from the strength shown earlier in the year,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The pause for total construction is perhaps best viewed from the vantage point of the three major construction sectors. For nonresidential building, the volume of construction starts soared 24 percent in 2014. While activity has leveled off in the near term for its commercial and institutional segments, much of this year’s softness for nonresidential building is related to a decreased amount of manufacturing plant construction, adversely affected by the sluggish global economy and falling energy prices.
“Economic factors that influence the commercial and institutional segments, such as receding vacancies and funding support from state and local bond measures, remain positive,” Murray said. “For residential building, the month-to-month variation has reflected the pattern of multifamily housing, which in August and September fell back from robust activity in June and July. Multifamily housing is still on track for double-digit growth in 2015. For nonbuilding construction, much of this year’s boost during the first half came from the start of several massive projects, including work on the Interstate 4 Ultimate Project in central Florida and several LNG terminals on the Gulf Coast of Texas and Louisiana. The exceptional amount of nonbuilding construction starts in the first half of 2015 was not sustainable, and activity is now proceeding at a more moderate pace. Going forward, the performance of nonbuilding construction will be affected in large measure by the progress made by Congress in passing the next multiyear federal transportation bill.”
Nonresidential building in September dropped 4 percent to $152.9 billion (annual rate). The institutional categories as a group fell 13 percent, as educational facilities retreated 20 percent from the elevated amount reported in August. Even with the decline, there were several noteworthy education projects that reached groundbreaking in September, including the $300 million Academy Museum of Motion Pictures in Los Angeles, a $130 million preparatory school in New York, and a $115 million building for the University of Connecticut in Hartford, Conn.
Also registering September declines were public buildings (courthouses and detention facilities), down 42 percent; and religious buildings, down 31 percent. On the plus side, transportation terminal work in September increased 21 percent, helped by the start of a $150 million airline terminal at George Bush Intercontinental Airport in Houston.
Amusement and recreational facilities advanced 12 percent in September, reflecting the start of a $125 million addition to the Greater Columbus Convention Center in Columbus, Ohio, and healthcare facilities edged up 2 percent.
The commercial building group in September improved 4 percent, regaining some ground after a 24 percent plunge in August. Office construction climbed 20 percent, supported by such projects as the $280 million Capital One Bank headquarters in Fairfax, Va., and the $62 million renovation (phase 4) of the U.S. Department of Commerce Building in Washington, D.C.
Hotel construction in September increased 19 percent, aided by a $140 million resort hotel in Rohnert Park, Calif., while warehouse construction grew 18 percent with the boost coming from large warehouse projects in Graham, N.C., ($125 million) and Cranbury, N.J. ($95 million).
Sliding back in September were store construction, down 6 percent; and garages/service stations, down 34 percent. Manufacturing plant construction in September increased 23 percent after a weak August, with the lift coming from a $500 million urea production facility at the Great Plains Synfuels Plant in North Dakota.
Residential building, at $236.9 billion (annual rate), dropped 11 percent in September. Multifamily housing, which has shown some volatility on a month-to-month basis, plunged 30 percent from its August amount. There were just two projects valued at $100 million or more that reached groundbreaking in September – a $132 million apartment building in New York and a $119 million residential tower in Seattle.
This compares to 8 multifamily projects valued at $100 million or more that reached groundbreaking in August, and 16 such projects that were entered as July starts. In September New York continued to be the leading metropolitan area in terms of the dollar amount of multifamily construction starts, but after reaching a peak in June New York’s multifamily activity has retreated. New York City’s 421-a tax abatement program, which provided developers of rental housing with partial tax exemptions for up to 25 years, expired in June and led to a surge of multifamily construction starts prior to its expiration.
Single-family housing in September receded 3 percent, slipping back after its 2 percent August gain. The September pace for single-family housing was still 10 percent higher than the average monthly amount reported during 2014. By geography, single-family housing in September showed declines for all five major regions – the South Central and West, each down 1 percent; the Midwest and Northeast, each down 2 percent; and the South Atlantic, down 7 percent.
Nonbuilding construction in September increased 5 percent to $133.9 billion (annual rate), making a partial rebound after dropping 12 percent in August. The electric utility and gas plant category provided the upward push, advancing 19 percent. Large electric utility projects reported as September starts included the following – two solar power projects in Utah, valued at $1.2 billion and $729 million respectively, a $320 million transmission line project in New Jersey, and a $200 million biomass energy plant in Georgia.
The public works categories in September were unchanged as a group from their August pace, due to varied behavior by project type. River/harbor development climbed 29 percent in September, reflecting two projects in Savannah, Ga., – $134 million for dredging the harbor entrance channel and $100 million for harbor expansion.
Water supply construction climbed 12 percent in September, while highway and bridge construction edged up 1 percent with the help of an $85 million deck rehabilitation project for the Liberty Bridge in Pittsburgh.
On the negative side, the miscellaneous public works category dropped 2 percent in September, although the latest month did include the start of a $303 million automated people mover system at Tampa International Airport. Sewer construction in September dropped 23 percent, following its 21 percent hike in August.
Through the first nine months of 2015, total construction starts on an unadjusted basis were $497.4 billion, up 12 percent from the same period a year ago. Excluding the electric utility and gas plant category, which soared earlier in 2015 due to the start of several massive liquefied natural gas (LNG) terminals, total construction starts during the first nine months of 2015 would be up 5 percent relative to last year.
Through the first nine months of 2015, the top five metropolitan areas ranked by the dollar amount of multifamily starts were as follows – New York, Miami, Los Angeles, Washington, D.C., and Boston.
The 12 percent increase for total construction starts on an unadjusted basis during the first nine months of 2015 came from growth for residential building and nonbuilding construction, while nonresidential building was down moderately after posting a substantial gain in 2014.
- Residential building climbed 17 percent year-to-date, with multifamily housing up 26 percent and single family housing up 13 percent.
- Nonbuilding construction year-to-date jumped 35 percent, with electric utilities and gas plants up 205 percent and public works up 4 percent. The considerable year-to-date increase for nonbuilding construction has become smaller as 2015 has proceeded.
- Nonresidential building year-to-date retreated 7 percent, due primarily to a 30 percent plunge for the manufacturing building category. The commercial building and institutional building groups were essentially unchanged year-to-date, registering slight 2 percent and 3 percent declines respectively.
By major region, total construction starts during the January-September period of 2015 revealed this pattern – the South Central, up 24 percent; the Northeast, up 22 percent; the South Atlantic, up 9 percent; the West, up 4 percent; and the Midwest, up 2 percent.