New Construction Starts in December Rebound 12 Percent

New construction starts in December climbed 12 percent to a seasonally adjusted annual rate of $733.3 billion, bouncing back following November's 12 percent decline, according to Dodge Data & Analytics. Highway and bridge construction soared 66 percent in December.

December's gain for total construction reflected varied improvement by each of the three main construction sectors.

  • Nonbuilding construction (public works and electric utilities/gas plants) jumped 43 percent, lifted by the start of the $2.3 billion I-66 Corridor Improvements Project in northern Virginia.
  • Nonresidential building rose 10 percent, aided by the start of two large data center projects.
  • Residential building edged up 1 percent.

"After weaker activity was reported in both October and November, the December rebound for total construction starts eased the extent of the decline that took place during the fourth quarter," stated Robert A. Murray, chief economist for Dodge Data & Analytics.

Nonresidential Building
Nonresidential building in December was $240.3 billion (annual rate), up 10 percent from the previous month. The commercial building categories as a group advanced 17 percent, as a 42 percent hike for office buildings provided much of the lift.

December office starts included two large Facebook data centers - a $750 million project in Sandston Va., and a $400 million project in Prineville, Ore. In addition, a $248 million office tower as part of the Amazon Block 21 Development in Seattle reached groundbreaking.

Warehouse construction in December climbed 12 percent, and included the start of a $140 million logistics park in Staten Island, N..Y, a $111 million Wal-Mart distribution center in Bentonville, Ark., and an $82 million Amazon fulfillment center in Memphis, Tenn. Hotel construction in December grew 5 percent, with support coming from the start of a $136 million JW Marriott hotel in Anaheim, Calif. However, slight declines were reported in December for commercial garages, down 1 percent; and store construction, down 2 percent.

The institutional building categories as a group increased 9 percent in December. Healthcare facilities climbed 29 percent, and included three very large projects - a $300 million addition to a medical center in Fort Myers, Fla., a $150 million new hospital tower in Leesburg, Va., and a $109 million addition to a hospital in Cherry Hill, N.J. The other major institutional category, educational facilities, receded 7 percent in December following its 13 percent November gain.

Large educational facilities projects that reached groundbreaking in December were led by a $135 million middle school in Sparks, Nev., a $90 million science and technology building at Virginia Polytechnic Institute in Roanoke, Va., and an $87 million business and behavior science building at Clemson University in Clemson, S.C.

The smaller institutional categories showed stronger activity in December. Public buildings (courthouses and detention facilities) increased 89 percent after a weak November, helped by the start of a $196 million judicial complex in Joliet, Ill. The transportation terminal category rose 42 percent, and included the $246 million National Hall security facility project at Reagan National Airport in Washington, D.C. Modest gains in December were reported for religious buildings, up 4 percent; and amusement-related work, up 3 percent. The manufacturing plant category fell 37 percent in December, although the latest month did include the start of a $150 million chemical research facility in Newark, Del., and a $125 million LG electronics factory in Clarksville, Tenn.

Residential Building
Residential building in December was $308.1 billion (annual rate), up 1 percent. The single-family side of the housing market rose 1 percent, continuing to show the modest improvement that's been present during the second half of 2017 after the slight loss of momentum reported last spring. Multifamily housing in December was unchanged from its November pace.

December featured groundbreaking for four large multifamily projects valued each at $100 million or more - the $224 million multifamily portion of a $380 million mixed-use building in San Francisco, a $220 million apartment building in New York, the $217 million multifamily portion of a $275 million mixed-use building in San Diego, and a $123 million apartment building in Minneapolis.

Nonbuilding Construction
Nonbuilding construction in December was $184.9 billion (annual rate), rebounding 43 percent after a 31 percent plunge in November. The public works categories as a group climbed 37 percent, with increases reported for most of the project types.

Highway and bridge construction soared 66 percent in December, with the boost coming from the $2.3 billion I-66 Corridor Improvements Project in northern Virginia, as well as the $547 million Southern Gateway highway upgrade project in the Dallas-Ft. Worth area.

The river/harbor development category jumped 155 percent in December, lifted by the start of a $278 million channel maintenance and dredging project in Charleston, S.C. Sizeable gains were also reported for sewer construction, up 35 percent; and water supply construction, up 25 percent; with the latter aided by the December start of a $233 million water purification plant expansion in Houston.

Miscellaneous public works was the one public works category to retreat in December, sliding 11 percent from November, which included the $2.0 billion Purple Line mass transit project in the Washington, D.C., metropolitan area. Despite the decline, the miscellaneous public works category in December did include the start of the $1.0 billion EPIC oil pipeline and storage facility project in Texas, with the pipeline running from the Permian Basin shale field to the Gulf of Mexico.

The electric utility/gas plant category jumped 93 percent in December, reflecting the start of a $992 million transmission line project in California, plus the start of a $750 million power plant in North Carolina and a $229 million power plant in Massachusetts.

New Construction Starts for 2017

For all of 2017, total construction starts grew 3 percent to $745.9 billion, which followed the 6 percent increase reported for 2016. The full-year 2017 gain was dampened by a 35 percent downturn for the electric utility/gas plant category. If electric utilities and gas plants are excluded, total construction starts for 2017 would be 5 percent higher than the corresponding amount for 2016.

The 3 percent increase for total construction starts at the national level in 2017 was the result of mixed behavior by geography. The Northeast climbed 17 percent, aided by strong gains for its institutional building sector and natural gas pipelines, while more moderate total construction growth was reported for the South Atlantic, up 6 percent; and the West, up 3 percent. Total construction declines in 2017 were reported for the South Central, down 3 percent; and the Midwest, down 8 percent.

Highway and bridge construction starts grew 7 percent in 2017, strengthening after a 9 percent decline in 2016. The top five states in 2017 ranked by the dollar amount of new highway and bridge construction starts, with their percent change from the previous year, were - Texas, down 20 percent; California, up 9 percent; Virginia, up 180 percent; Florida, up 23 percent; and Pennsylvania, up 32 percent.

"On a quarterly basis, growth in 2017 was reported during the first and third quarters, while activity retreated during the second and fourth quarters, continuing the up-and-down pattern around an upward trend that was present during 2016," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "On the positive side for 2017, institutional building assumed a leading role in keeping the nonresidential building expansion going, reflecting elevated activity for transportation terminal starts and further improvement by educational facilities. Manufacturing plant construction starts strengthened, ending a two-year decline, and commercial building was able to stay close to its heightened 2016 amount. Residential building in 2017 showed more growth for single family housing, offsetting a downturn for multifamily housing. And, public works construction in 2017 was able to strengthen, helped by the start of several very large pipeline projects and a moderate gain for highway and bridge construction."

"The construction industry over the past two years has made the transition to a more mature stage of expansion, characterized by slower rates of growth for total construction compared to the 11 percent to 13 percent yearly gains during the 2012-2015 period," Murray indicated. "For 2018, the construction expansion is anticipated to continue at a modest pace. The tax reform package is expected to provide a near term lift to overall economic growth, and the likely beneficiaries would be commercial building and multifamily housing. Funding support for institutional building will come from the state and local bond measures passed in recent years. Passage of a new infrastructure program at the federal level could be a plus for public works, although the impact at the construction site is likely to be felt more in 2019 than in 2018, as the program would feature incentives to boost funding from state, local, and private sources."

 

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