The value of new construction starts in January receded 2 percent to a seasonally adjusted annual rate of $725.9 billion, easing slightly after December’s 13 percent hike, according to Dodge Data & Analytics. The nonbuilding construction sector, comprised of public works and electric utilities/gas plants, pulled back 18 percent after surging 45 percent in December, as that month was boosted by the start of the $2.3 billion I-66 Corridor Improvements Project in northern Virginia and a $992 million transmission line project in California.
At the same time, nonresidential building edged up 1 percent in January, supported by groundbreaking for the $1.3 billion domed stadium in Las Vegas that will be the new home for the NFL’s Oakland Raiders once construction is completed prior to the 2020 season. In addition, residential building climbed 7 percent in January, helped by a rebound for multifamily housing after three straight months of declines.
On an unadjusted basis, total construction starts in January were $52.2 billion, down 7 percent from the same month a year ago. On a 12-month moving total basis, total construction starts in the 12 months ending January 2018 were up 2 percent from the 12 months ending January 2017.
By geography, total construction starts for January 2018 relative to January 2017 registered this pattern – the Northeast, down 36 percent; the West, down 10 percent; the South Central, down 9 percent; the South Atlantic, unchanged; and the Midwest, up 42 percent.
“Although the expansion for the construction industry lost some momentum during 2017, on a broad level it can be characterized as deceleration as opposed to decline,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “January’s level of activity, which held close to last year’s mid-range, is consistent with the picture of a decelerating expansion. The factors affecting construction activity going forward in 2018 have become more varied. Some dampening may come from higher material prices and tight labor markets, yet while interest rates are rising the increases are expected to stay moderate this year. The tax reform legislation is anticipated to lift economic growth in the near term, which may benefit commercial building and manufacturing construction starts. The Trump Administration has provided the outline of an infrastructure program, but the details need to be worked out by Congress against the backdrop of a growing federal budget deficit, which may limit any benefit this year for public works. One plus for 2018 is that the institutional side of nonresidential building should stay close to last year’s elevated pace.”
Nonbuilding construction in January was $153.8 billion (annual rate), down 18 percent from December’s heightened amount. The public works categories as a group fell 15 percent, with a substantial 34 percent drop for highway and bridge construction which had soared 66 percent in December with the start of the $2.3 billion I-66 Corridor Improvements Project in northern Virginia. In January, the largest highway and bridge projects were smaller in scale – a $230 million bridge in Tampa and a $105 million highway interchange upgrade in Virginia Beach, Va.
Reduced activity was also reported in January for sewer construction and water supply construction, each with 26 percent declines. The miscellaneous public works category, which includes pipelines and mass transit projects, climbed 20 percent in January as the $2.0 billion NEXUS natural gas pipeline in Ohio and Michigan was entered as a construction start.
The dollar amount of new pipeline projects during 2017 shot up 90 percent to $22.3 billion, and while that amount may not be equaled in 2018, January’s NEXUS pipeline project shows that at least for the near term major pipeline projects continue to reach the construction start stage.
River/harbor development work also strengthened in January, advancing 19 percent with the lift coming from $260 million for the harbor deepening project in Charleston, S.C., and a $240 million lock replacement project in Chattanooga, Tenn. The often-volatile electric utility/gas plant category plunged 39 percent in January, following December’s 93 percent increase. Even with the decline, January included the start of an $872 million gas-fired power plant in Louisiana and a $260 million solar power facility in Texas.
Nonresidential building in January was $240.8 billion (annual rate), a slight 1 percent rise on top of December’s 10 percent gain. The institutional categories as a group rose 8 percent, led by a 149 percent jump for amusement-related projects.
The other institutional project types all showed reduced activity to varying degrees, relative to December. Educational facilities, the largest nonresidential building category by dollar amount, slipped 1 percent. Large educational facilities projects that reached groundbreaking in January were a $210 million biomedical innovation building for Stanford University in Stanford, Calif., a $150 million expansion to the Denver Art Museum in Denver and a $100 million exhibition space for the Space Shuttle Endeavor at the California Science Center in Los Angeles.
Large high school projects that reached groundbreaking in January were in Crofton, Md. ($96 million), Tyler, Texas ($95 million) and Boiling Springs, S.C. ($95 million), among other localities.
Healthcare facilities retreated 10 percent in January, although the latest month did include the start of several large hospital projects, such as the $254 million Hubbard Center for Children Medical Center in Omaha, Neb., the $120 million replacement for the Memorial Hospital Complex in York, Pa., and a $109 million medical center renovation in Canandaigua, N.Y.
The remaining institutional categories showed these January declines – transportation terminals, down 6 percent; religious buildings, down 23 percent; and public buildings (courthouses and detention facilities), down 25 percent.
The manufacturing plant category strengthened in January, climbing 99 percent after a weak December. Major manufacturing projects that were entered as January starts were a $400 million portion of an upgrade underway at a semiconductor plant in Chandler, Ariz., a $200 million aerodynamic testing center for the Ford Motor Co. in Allen Park, Mich., a $110 million food processing plant in Longmont, Colo., and a $105 million expansion to a food processing plant in Jack, Ala.
The commercial categories as a group fell 15 percent in January. New office construction starts retreated 31 percent after a sharp 44 percent jump in December which included two large Facebook data centers, located in Sandston, Va. ($750 million) and Prineville, Ore. ($400 million).
The largest office projects that reached groundbreaking in January were a $350 million Facebook data center in New Albany, Ohio, a $160 million office building in Washington, D.C., and the $140 million renovation to the Portland Building in Portland, Ore. Hotel construction dropped 13 percent after a 4 percent gain in December, although the latest month did include the start of a $300 million hotel in New York. The remaining commercial categories witnessed this performance relative to December – stores, down 2 percent; warehouses, unchanged; and commercial garages, up 4 percent.
Residential building in January was $331.3 billion (annual rate), up 7 percent. Multifamily housing jumped 39 percent, showing renewed strength after the loss of momentum that took place during the closing months of 2017.
During January, there were 11 multifamily projects valued at $100 million or more that reached groundbreaking, compared to four such projects in December. The largest January multifamily projects were the $260 million multifamily portion of a $289 million mixed-use complex in San Jose, Calif., a $250 million multifamily high-rise in Jersey City, N.J., and a $175 million multifamily high-rise in Houston.
Single-family housing in January receded 3 percent, settling back after the modest gains reported during the previous five months. In January, single-family housing showed this pattern by major region – the West, down 11 percent; the South Central, down 2 percent; the South Atlantic, down 1 percent; the Midwest, unchanged; and the Northeast, up 9 percent.
The 7 percent decline for total construction starts on an unadjusted basis for January 2018 relative to January 2017 was the result of a mixed performance by major sector. Nonbuilding construction increased 4 percent, with public works up 6 percent while electric utilities/gas plants dropped 6 percent. Nonresidential building fell 20 percent from a very strong January 2017 which included such unusually large construction starts as the $3.6 billion Central Terminal Building replacement project at LaGuardia Airport in New York, the $600 million McClellan Business Park data center in McClellan Calif., and a $477 million terminal project at San Francisco International Airport.
Compared to the same month a year ago, the institutional and commercial building segments of nonresidential building were down 23 percent and 21 percent respectively, while manufacturing plant starts advanced 18 percent.
Residential building rose 1 percent from the same month a year ago, with single-family housing up 3 percent while multifamily housing slipped 2 percent.
Useful perspective is made possible by looking at 12-month moving totals, in this case the 12 months ending January 2018 versus the 12 months ending January 2017, which reveal total construction starts advancing 2 percent.
By major sector, nonbuilding construction grew 2 percent, with public works up 12 percent and electric utilities/gas plants down 29 percent. Nonresidential building increased 3 percent, with institutional building up 7 percent, commercial building down 5 percent, while manufacturing plant starts climbed 26 percent. Residential building grew 2 percent, with single family housing up 8 percent while multifamily housing fell 12 percent.