At a seasonally adjusted annual rate of $667.6 billion, new construction starts in February advanced 10 percent compared to the previous month, according to Dodge Data & Analytics.

Much of the lift in February came from the nonbuilding construction sector, as its electric power and gas plant category included a $3 billion segment of a liquefied natural gas (LNG) export terminal in Texas as well as the start of six power plant projects valued each in excess of $200 million.

Nonresidential building also helped out in February with a moderate gain, resuming its hesitant upward track after the lackluster activity reported at the outset of 2016. However, residential building settled back in February following its improved January performance.

Highway and bridge construction retreated 17 percent in February.

“The month-to-month pattern of construction starts will often reflect the presence of unusually large projects, and this explains February’s gain relative to January,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “It also helps to explain the elevated and unsustainable pace of total construction starts during the early months of 2015, and by comparison the substantial year-to-date declines for nonbuilding construction and nonresidential building so far in 2016. During the first two months of 2015, there were 13 projects valued at $500 or more that reached the construction start stage, compared to five such projects during the first two months of 2016. On balance, the current economic environment is still favorable for the continued expansion of construction activity, which may not show up in the year-to-date statistics for total construction starts until the second half of this year. Interest rates continue to be low, more construction-related bond measures have been passed at the state and local government level, and the new multiyear federal transportation bill is in place. While there are signs that banks are beginning to tighten standards on commercial real estate loans, at the urging of federal bank regulators, market fundamentals such as occupancies and rents remain generally supportive of new construction.”

Nonbuilding Construction

Nonbuilding construction in February surged 49 percent to $200.9 billion (annual rate). The electric power and gas plant category jumped 328 percent, boosted by the start of the $3 billion third segment (or train) of an LNG export terminal in Freeport, Texas. (The first two segments of this project were entered as construction starts back in January 2015.)

There were also six very large power plant projects entered as February starts – a $761 million gas-fired power plant in Connecticut plus five large solar power projects, of which two were located in Texas ($394 million and $375 million), two in California ($388 million and $270 million), and one in Arizona ($250 million.) In addition, February included the start of several large wind farm projects, with two located in Texas ($186 million and $185 million) and one in West Virginia ($155 million).

The public works categories as a group slipped 1 percent in February, essentially stabilizing at January’s level, although with a different mix by category type. Highway and bridge construction, which had climbed 19 percent in January with the help of a $655 million highway toll lanes project in North Carolina, retreated 17 percent in February.

Also dropping back in February was sewer construction, sliding 7 percent. On the plus side, water supply construction increased 53 percent due to the February start of a $159 million water treatment plant in Texas, while river/harbor development grew 33 percent.

The miscellaneous public works category rose 14 percent in February, supported by three large projects – a $520 million dry gas gathering pipeline system for the Utica shale field in Ohio, the $220 million RIO oil pipeline in Texas and New Mexico, and the $100 million renovation to Raymond James Stadium in Tampa.

Nonresidential Building

Nonresidential building, at $185.5 billion (annual rate), rose 4 percent in February. The commercial building categories as a group increased 15 percent, strengthening for the third month in a row after particularly weak activity was reported back in November.

Hotel construction in February climbed 48 percent, aided by the start of the $357 million hotel portion of the $530 million Gaylord Rockies Resort and Convention Center in Aurora, Colo., and the $177 million hotel portion of the $306 million Omni City Center Convention Hotel in Louisville, Ky.

Office construction in February advanced 25 percent, with the push coming from five large projects – the $275 million Southport Waterfront Corporate Campus in Renton, Wash., a $266 million office building in Washington, D.C., a $200 million Facebook data center in Prineville, Ore., a $178 million research and development campus in Irvine, Calif., and a $174 million office building in San Francisco.

During the first two months of 2016, the top five metropolitan areas ranked by the dollar amount of new office starts were the following – San Francisco, New York, Washington, D.C., Seattle and Boston. On the negative side for commercial building, both stores and warehouses retreated in February, falling 15 percent and 7 percent respectively. The manufacturing building category in February dropped 43 percent from its improved January amount, although the latest month did include the start of a $128 million electrical control development center in Pennsylvania.

The institutional building categories as a group edged up 2 percent in February, registering a slight rebound after a 10 percent decline in the previous month. The amusement and recreational category climbed 15 percent in February, lifted by $173 million for the convention center portion of the Gaylord Rockies Resort and Convention Center in Aurora, Colo.

More substantial percentage gains were reported for transportation terminals, up 74 percent with the boost coming from $79 million for rail station work in Waipahu, Hawaii, and the religious building category which rebounded 83 percent after depressed activity in January.

In contrast, educational facilities settled back 13 percent in February following 19 percent growth in the previous month. Despite the decline, February did include groundbreaking for several noteworthy educational facility projects, such as a $134 million business school facility at Carnegie Mellon University in Pittsburgh and a $90 million high school in Alabaster, Ala. Decreased activity in February was also reported for healthcare facilities and the public buildings category, as each fell 8 percent.

Residential Building

Residential building in February dropped 5 percent to $281.3 billion (annual rate), following the 5 percent gain reported in January. Single-family housing receded 3 percent, reflecting a varied pattern by geography – the South Atlantic, down 9 percent; the West and South Central, each down 5 percent; and the Northeast and Midwest, each up 7 percent.

Multifamily housing slipped 8 percent in February after strengthening 24 percent over the previous two months. Even with the pullback, February did include groundbreaking for eight multifamily projects valued at $100 million or greater, led by the $233 million Gran Paraiso Bay condominium building in Miami, a $165 million residential tower in Atlanta, a $143 million condominium building in West New York, N.J., and the $112 million multifamily portion of the Omni City Center Convention Hotel in Louisville, Ky.

Year-to-Date

For the first two months of 2016, total construction starts on an unadjusted basis were $87.1 billion, down 16 percent from the same period a year ago which featured the start of several massive LNG terminal projects. If the volatile electric power and gas plant category is excluded, total construction starts on a seasonally adjusted basis in February would be down 1 percent from January, while the year-to-date comparison on an unadjusted basis would show a 6 percent decline.

The 16-percent decline for total construction starts on an unadjusted basis during the first two months of 2016 versus last year was the result of a mixed performance by major sector.

• Nonbuilding construction plunged 34 percent year-to-date, with electric utilities and gas plants down 55 percent while public works retreated a more moderate 9 percent. 
• Nonresidential building dropped 21 percent year-to-date, with manufacturing plant construction down 55 percent, the institutional building segment down 25 percent, and the commercial building segment down 7 percent.
• Residential building registered a 9 percent year-to-date gain, with single family housing up 8 percent and multifamily housing up 12 percent. 

Additional perspective is obtained by looking at 12-month moving totals, in this case the 12 months ending February 2016 versus the 12 months ending February 2015, which lessens the volatility present in comparisons of just two months.

On this basis, total construction starts were up 2 percent as the result of this performance by major sector – residential building, up 15 percent; nonbuilding construction, up 2 percent; and nonresidential building, down 12 percent.

By geography, the 12 months ending February 2016 showed this pattern for total construction starts – the Northeast, up 15 percent; the Midwest, up 5 percent; the South Atlantic, up 3 percent; the West, up 2 percent; and the South Central, down 10 percent.