Construction Starts Up 8 Percent in 2015

New construction starts in December advanced 4 percent to a seasonally adjusted annual rate of $591.6 billion, according to Dodge Data & Analytics. The December gain follows a 5 percent decline in November, and brings total construction activity back close to the amount that was reported in October.

Construction starts were up 8 percent in 2015 for the full year.

December showed moderate increases for each of the three main construction sectors – nonresidential building, residential building, and nonbuilding construction (public works and electric utilities).

Nonresidential Building 

Nonresidential building in December grew 3 percent to $178.5 billion (annual rate). The commercial building group provided most of the December lift to nonresidential building, rising 9 percent from the previous month.

Office construction increased 6 percent, and included the December start of a $210 million office tower in Oklahoma City, a $100 million office building in East Hartford, Conn., and a $44 million corporate headquarters for Subaru in Camden, N.J. Store construction advanced 17 percent in December, reflecting the start of three outlet centers located in Clarksburg, Md. ($41 million), Baltimore ($35 million), and the Houston area ($35 million).

The garage and service station category in December jumped 50 percent, boosted by the start of a $331 million consolidated car rental facility in Kahului, Hawaii. Warehouse construction in December was unchanged from its November amount, while hotel construction fell 17 percent. The manufacturing plant category in December dropped 16 percent, maintaining the weak performance that emerged during the second half of 2015, although December did include the start of several automotive-related projects such as a $75 million automobile assembly plant in the St. Louis area.

The institutional side of the nonresidential building market held steady in December. Amusement-related work soared 87 percent, lifted by three noteworthy projects – the $478 million renovation and expansion of the Miami Beach Convention Center in Miami Beach, Fla., the $130 million renovation of the Nassau Coliseum in Uniondale, N.Y., and the $100 million expansion of the Kennedy Center for the Performing Arts in Washington, D.C.

Transportation terminal work climbed 48 percent in December, and gains were also reported for religious buildings, up 13 percent; and healthcare facilities, up 11 percent. The healthcare facilities category in December was boosted by three large projects, located in Minneapolis ($147 million), Davenport, Iowa ($139 million), and Longmont, Colo. ($108 million).

However, educational facilities (the largest nonresidential building category by dollar volume) retreated 19 percent in December following its improved pace during the previous two months. Cushioning the December decline for educational facilities was groundbreaking for a $100 million biomedical research center at Northwestern University in Chicago. The public buildings category also weakened in December, sliding 11 percent.

Residential Building

Residential building in December increased 6 percent to $278.1 billion (annual rate). Multifamily housing finished the year on a strong note, rebounding 22 percent after slipping 5 percent in November.

December featured groundbreaking for 10 multifamily projects valued at $100 million or more, led by two projects in New York valued at $575 million and $229 million respectively, a $169 million mixed-use tower in Jersey City, N.J., and a $167 million residential tower in Miami.

Single-family housing in December was unchanged from its pace in November, essentially staying with the flat pattern that emerged during the second half of 2015.

Nonbuilding Construction

Nonbuilding construction in December rose 3 percent to $135.0 billion (annual rate). The gain was due to a 108 percent rebound for the electric utility and gas plant category after a weak November, although the level of activity remained well below what was reported during the first half of 2015.

December projects that contributed to the electric utility and gas plant increase were a $1.0 billion gas-fired power plant in Pennsylvania, a $380 million gas-fired power plant in South Carolina and a $300 million wind farm in North Dakota. The public works categories as a group slipped back 8 percent in December following the 18 percent jump reported in November.
Weaker activity was registered by highway and bridge construction, down 7 percent; and miscellaneous public works, down 29 percent.

The miscellaneous public works category in December did include the start of the $915 million Saddlehorn petroleum pipeline in the states of Oklahoma, Kansas and Colorado, but activity for the category was still down relative to a strong November that included the start of the $1.6 billion Westside Subway Extension project in Los Angeles. Each of the environmental public works categories in December posted increases – river/harbor development, up 26 percent; water supply construction, up 19 percent; and sewer construction, up 9 percent.

Full-Year 2015

For 2015 as a whole, total construction starts climbed 8 percent to $645.5 billion, according to Dodge Data & Analytics. This continues the pattern of moderate expansion for total construction starts registered during the previous three years – 2012, up 12 percent; 2013, up 11 percent; and 2014, up 9 percent.

Highway and bridge construction in 2015 climbed 10 percent.

The 8 percent gain for total construction starts at the national level in 2015 was the result of greater activity in all five major regions. Leading the way was the Northeast, up 17 percent; followed by the South Central, up 16 percent; the South Atlantic, up 4 percent; the Midwest, up 3 percent; and the West, up 2 percent. 

For 2015 as a whole, nonresidential building fell 8 percent to $204.2 billion. The decline followed a 24 percent increase in 2014, and the 2015 annual amount was still 14 percent above the level reported for 2013.

Much of the decline for nonresidential building in 2015 reflected a 39 percent reduction for the manufacturing plant category following its 87 percent surge in 2014, as weaker energy prices in 2015 led to a pullback for large petrochemical plants. If the manufacturing plant category is excluded, nonresidential building in 2015 would be down a modest 2 percent after a 17 percent hike in 2014.

The institutional building group in 2015 settled back 4 percent after advancing 13 percent in 2014. Decreased activity was reported for healthcare facilities, down 10 percent, as well as such categories as public buildings, down 3 percent; amusement-related work, down 6 percent; and transportation terminals, down 11 percent.

The educational facilities category managed to rise 1 percent in 2015 on top of its 15 percent gain in 2014. The top five states for new educational facility starts in 2015, ranked by dollar volume, were – Texas, New York, California, Massachusetts and Ohio.

The office category in 2015 pulled back 5 percent, although it’s important to note that the decline followed a 37 percent increase in 2014 that was led by such projects as the $2.3 billion office portion of the $2.5 billion Apple corporate headquarters in Cupertino, Calif.

The top five metropolitan areas ranked by the dollar amount of new office starts in 2015 were – New York, Dallas-Ft. Worth, Washington, D.C., Chicago, and Boston.

The 2015 amount for residential building was $265.4 billion, up 14 percent and stronger than the 10 percent gain that was reported for 2014. Single-family housing grew 13 percent in dollar terms, showing some improvement after the 3 percent rise in the previous year.

The regional pattern for single family housing in 2015 revealed gains in all five major regions, to varying degrees – the West, up 23 percent; the South Atlantic, up 17 percent; the South Central, up 7 percent; the Midwest, up 6 percent; and the Northeast, up 2 percent.

Multifamily housing in 2015 increased 18 percent, not quite as fast as the 32 percent hike reported in 2014, but marking the sixth straight year of double-digit growth. By major region, multifamily housing showed this performance in 2015 – the Northeast, up 35 percent; the Midwest, up 17 percent; the South Central, up 11 percent; the South Atlantic, up 8 percent; and the West, up 6 percent.

The top five metropolitan areas in terms of the 2015 dollar amount of multifamily starts were – New York, Miami, Washington, D.C., Los Angeles, and Boston. Metropolitan areas ranked 6 through 10 were – Chicago, Seattle, Dallas-Ft. Worth, Houston and San Francisco.

For the full year 2015, nonbuilding construction climbed 23 percent to $176.0 billion, a sharp increase after the 8 percent reduction in 2014. The substantial nonbuilding gain for 2015 was due entirely to the electric power and gas plant category soaring 141 percent.

In contrast, public works construction in 2015 showed no change from the previous year, as the result of a mixed performance by project type. Highway and bridge construction in 2015 climbed 10 percent following a 13 percent decline in the previous year, helped by such starts as the $2.3 billion Interstate 4 Ultimate Project in central Florida.

The environmental public works categories registered moderate declines in 2015, with sewer and water supply construction each down 4 percent and river/harbor development down 9 percent. The miscellaneous public works category fell 16 percent in 2015, relative to its elevated amount in 2014 that included the start of several large mass transit projects.