NEW YORK – March 18, 2016 – At a seasonally adjusted
annual rate of $667.6 billion, new construction starts in February advanced 10%
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. For the first two months of 2016, total
construction starts on an unadjusted basis were $87.1 billion, down 16% 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% from January, while the year-to-date comparison on an
unadjusted basis would show a 6% decline.
The February statistics produced a reading of 141 for the
Dodge Index (2000=100), compared to 129 for January. For 2015 as a whole, the
Dodge Index averaged 138. “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 million 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 in February surged 49% to $200.9
billion (annual rate). The electric power and gas plant category jumped 328%,
boosted by the start of the $3 billion third segment (or train) of an LNG
export terminal in Freeport TX. (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% in
February, essentially stabilizing at January’s level, although with a different
mix by category type. Highway and bridge construction, which had climbed 19% in
January with the help of a $655 million highway toll lanes project in North Carolina,
retreated 17% in February. Also dropping back in February was sewer
construction, sliding 7%. On the plus side, water supply construction increased
53% due to the February start of a $159 million water treatment plant in Texas,
while river/harbor development grew 33%. The miscellaneous public works
category rose 14% 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 FL.
Nonresidential building, at $185.5 billion (annual rate),
rose 4% in February. The commercial building categories as a group increased
15%, strengthening for the third month in a row after particularly weak
activity was reported back in November. Hotel construction in February climbed
48%, aided by the start of the $357 million hotel portion of the $530 million
Gaylord Rockies Resort and Convention Center in Aurora CO and the $177 million
hotel portion of the $306 million Omni City Center Convention Hotel in
Louisville KY. Office construction in February advanced 25%, with the push
coming from five large projects – the $275 million Southport Waterfront
Corporate Campus in Renton WA, a $266 million office building in Washington DC,
a $200 million Facebook data center in Prineville OR, a $178 million research
and development campus in Irvine CA, and a $174 million office building in San
Francisco CA. 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 CA, New York NY, Washington DC, Seattle WA, and Boston MA. On the
negative side for commercial building, both stores and warehouses retreated in
February, falling 15% and 7% respectively. The manufacturing building category
in February dropped 43% 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% in February, registering a slight rebound after a 10% decline in the
previous month. The amusement and recreational category climbed 15% in
February, lifted by $173 million for the convention center portion of the
Gaylord Rockies Resort and Convention Center in Aurora CO. More substantial
percentage gains were reported for transportation terminals, up 74% with the
boost coming from $79 million for rail station work in Waipahu HI, and the religious
building category which rebounded 83% after depressed activity in January. In
contrast, educational facilities settled back 13% in February following 19%
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 PA and a $90 million high school in Alabaster AL. Decreased activity
in February was also reported for healthcare facilities and the public
buildings category, as each fell 8%.
Residential building in February dropped 5% to $281.3
billion (annual rate), following the 5% gain reported in January. Single family
housing receded 3%, reflecting a varied pattern by geography – the South
Atlantic, down 9%; the West and South Central, each down 5%; and the Northeast
and Midwest, each up 7%. Multifamily housing slipped 8% in February after
strengthening 24% 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 FL, a $165 million residential tower in Atlanta GA, a $143
million condominium building in West New York NJ, and the $112 million
multifamily portion of the Omni City Center Convention Hotel in Louisville KY.
During the first two months of 2016, the leading metropolitan area in terms of
the dollar amount of multifamily starts was New York NY, maintaining its number
one ranking for this project type. Rounding out the top five for multifamily
construction were the following – Miami FL, Boston MA, Atlanta GA, and San
Francisco CA.
The 16% 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% year-to-date, with electric utilities and gas plants down 55% while public
works retreated a more moderate 9%. Nonresidential building dropped 21%
year-to-date, with manufacturing plant construction down 55%, the institutional
building segment down 25%, and the commercial building segment down 7%.
Residential building registered a 9% year-to-date gain, with single family
housing up 8% and multifamily housing up 12%. By geography, total construction
starts for the January-February period of 2016 showed a 46% decline for the
South Central region, which last year included the start of several massive LNG
terminal projects. The other four regions revealed some strengthening for
year-to-date total construction starts – the Midwest and Northeast, each up 5%;
the South Atlantic, up 2%; and the West, up 1%.
Additional perspective is obtained by looking at
twelve-month moving totals, in this case the twelve months ending February 2016
versus the twelve months ending February 2015, which lessens the volatility
present in comparisons of just two months. On this basis, total construction
starts were up 2% as the result of this performance by major sector –
residential building, up 15%; nonbuilding construction, up 2%; and
nonresidential building, down 12%. By geography, the twelve months ending
February 2016 showed this pattern for total construction starts – the
Northeast, up 15%; the Midwest, up 5%; the South Atlantic, up 3%; the West, up
2%; and the South Central, down 10%.
Source: Construction.com
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