June Construction Starts Jump 11 Percent

New construction starts in June climbed 11 percent to a seasonally adjusted annual rate of $896.3 billion, according to Dodge Data & Analytics. The increase marked the second double-digit gain in a row, following the 15 percent hike that was reported for May. Highway and bridge construction was up 25 percent.

Boosting activity in June was a sharp 57 percent advance for nonresidential building, which benefitted from the start of two massive manufacturing plant projects and two massive office-building projects. The two large manufacturing projects were a $6.5 billion uranium processing facility in Oak Ridge Tenn., and a $1.7 billion petrochemical plant in Port Arthur, Texas, while the two large office projects were the $1.8 billion Spiral office tower in New York and a $665 million office tower in Chicago.

Residential building in June grew 4 percent, helped by growth for multifamily housing. The nonbuilding construction sector (public works and electric utilities) retreated 28 percent in June, pulling back after the sharp 37 percent increase reported in May that reflected the start of several large natural gas pipelines and rail-related projects.

Nonresidential Building
Nonresidential building in June was $402.3 billion (annual rate), up 57 percent from May. The manufacturing building category received an 18-fold increase in June relative to a weak May, with the primary boost coming from the June start of the U.S. Department of Energy’s $6.5 billion uranium processing facility in Oak Ridge, Tenn. This massive project will support the nation’s nuclear weapons stockpile and provide uranium for fuel for U.S. Navy submarines and aircraft carriers. If this project is excluded from the June construction start statistics, manufacturing building in June would still have shown a five-fold increase, while nonresidential building would have been up 26 percent and total construction starts would have been up 2 percent.

The other large manufacturing building project entered as a June start was a $1.7 billion petrochemical plant expansion and ethane steam cracker plant in Port Arthur Texas. The commercial building categories as a group climbed 25 percent in June, advancing further after moderate gains in April (up 5 percent) and May (up 7 percent). Office construction surged 53 percent in June, led by the start of the $1.8 billion, 64-story Spiral office tower in the Hudson Yards district of New York, as well as the start of a $665 million, 54-story office building on North Wacker Drive in Chicago.

Other large office projects in June were a $200 million data center in Ashburn, Va., a $200 million office tower in Denver and a $145 million data center in Mesa, Ariz.

Other commercial categories posting June gains were commercial garages, up 22 percent; store construction, up 18 percent; and warehouses, up 14 percent. The warehouse category was helped by such large projects as a $150 million Amazon distribution center in the Birmingham, Ala., area and a $107 million warehouse complex in Fremont, Calif.

Hotel construction was the one commercial project type to report a June decline, sliding 15 percent, although the latest month did include the start of several large hotel projects in New York, such as a $125 million Hard Rock hotel and a $120 million Ritz Carlton hotel.

The institutional building side of nonresidential building increased 11 percent in June. Healthcare facilities had a strong month, jumping 103 percent compared to a lackluster May, led by the $250 million New Trinity Hospital in Minot, N.D., and the $148 million Penn State Health Children’s Hospital in Hershey, Pa.

Educational facilities strengthened 16 percent in June, featuring such university projects as a $230 million facility at the University of Washington in Seattle and a $225 million facility at the University of Oregon in Eugene, Ore., plus the start of large high school projects in Somerville, Mass., ($202 million), Frisco, Texas ($200 million), Verona, Wis., ($183 million) and Madera, Calif. ($179 million).

Of the smaller institutional categories, public buildings (courthouses and detention facilities) registered a 12 percent gain in June, but declines were reported for transportation terminals, down 16 percent; religious buildings, down 35 percent; and amusement-related projects, down 37 percent (from a May that included groundbreaking for the $764 million expansion to the Washington State Convention Center in Seattle). Despite its decline, the transportation terminal category did include the June start of the new $374 million North Concourse terminal at Reagan National Airport in Arlington, Va.

Residential Building
Residential building in June was $323.0 billion (annual rate), up 4 percent. Multifamily housing grew 9 percent in June, advancing for the second month in a row after weak activity in April. There were seven projects valued each at $100 million or more that were reported as construction starts in June, compared to six such projects in May.

The large June projects included the $213 million Aston Martin multifamily tower in Miami, the $195 million multifamily portion of the $260 million Essex Crossing mixed-use building in New York and the $186 million multifamily portion of a $215 million mixed-use tower in Boston.

Nonbuilding Construction
Nonbuilding construction in June dropped 28 percent to $171.0 billion (annual rate), sliding back after the 37 percent increase that was reported for May. The public works categories as a group dropped 34 percent in June after May’s 44 percent surge. To a large extent, the recent up-and-down pattern shown by public works was related to the volatility exhibited by the miscellaneous public works category, which includes pipelines, mass transit and site work.

The miscellaneous public works category plunged 67 percent in June following May’s 161 percent increase. May included three substantial natural gas pipelines as construction starts (the $2.1 billion Mountaineer Xpress Pipeline, the $1.9 billion Gulf Coast Express Pipeline, and the $600 million Gulf Xpress project) plus two large rail projects (the $1.4 billion Westside Purple Line Extension in Los Angeles and the $1.1 billion Green Line Extension in Somerville, Mass.)

By contrast, the two largest miscellaneous public works projects entered as June starts were a $576 million segment of the Atlantic Coast natural gas pipeline in West Virginia and a $280 million rail project at Phoenix Sky Harbor International Airport. At the same time, both pipeline and rail-related construction starts have stayed strong during the first half of 2018, with pipeline starts down only 15 percent from a robust first half of 2017 while rail-related starts were up 53 percent compared to last year.

The environmental public works categories in June weakened from their May amounts, with water supply construction down 9 percent, river/harbor development down 15 percent, and sewer construction down 58 percent. Highway and bridge construction was the one public works category to show growth in June, climbing 25 percent with the help of such projects as the $312 million I-95 South highway widening project in the Philadelphia area and the $270 million I-85 North highway widening project in the Atlanta area.

The electric utility/gas plant category in June improved 73 percent from a weak May, with the lift coming from five new wind farms located in Iowa ($375 million and $108 million), Kansas ($300 million), Michigan ($261 million), and Minnesota ($158 million).

Through the first six months of 2018, total construction starts on an unadjusted basis were $395.7 billion, up 1 percent from the same period a year ago. If the volatile electric utility/gas plant category is excluded, total construction starts during the first six months of 2018 would be up 3 percent relative to last year.

The 1 percent increase for total construction starts on an unadjusted basis for the first six months of 2018 compared to last year was due to a mixed performance by major sector.
• Nonresidential building year-to-date dropped 3 percent, due to this pattern by segment – commercial building down 8 percent, institutional building down 6 percent, and manufacturing building up 49 percent.
• Residential building year-to-date rose 6 percent, with multifamily housing up 8 percent and single family housing up 5 percent.
• Nonbuilding construction year-to-date was essentially even with last year, with public works up 9 percent and electric utilities/gas plants down 48 percent.
• end of 2017. By region, the first half of 2018 showed this performance for single family housing compared to last year – the West, up 11 percent; the South Atlantic, up 5 percent; the South Central, up 4 percent; the Northeast, up 2 percent; and the Midwest, up 1 percent.

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