New Construction Starts in December Climb 5%; Annual Total for 2009 Drops 26% to $412 Billion
New York, N.Y. – January 22, 2010 – New construction starts in December improved 5% to a seasonally adjusted annual rate of $425.8 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. While nonresidential building and housing were essentially steady with the prior month, the nonbuilding construction sector (public works and electric utilities) strengthened in December, providing the lift to total construction. For the full year 2009, total construction starts plunged 26% to $411.6 billion, marking the third straight year of diminished contracting after declines of 7% in 2007 and 13% in 2008.
The December statistics produced a reading of 90 for the Dodge Index (2000=100), up from November’s 86. The Dodge Index for all of 2009 was 87, so December’s pace of construction starts came in slightly above the full year average. “The construction industry went through a particularly tough year in 2009, as the 26% annual decline for construction starts was the steepest in at least the past forty years,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “At the same time, the bottom for construction starts was reached in February, to be followed by an up-and-down pattern during 2009 which suggests that the transition has been made from steady decline to at least low-level stability. Single family housing, while still remaining at a very low volume, began to show some improvement as 2009 progressed. Funding from the federal stimulus bill helped to produce gains for highways and bridges, as well as a pickup for a few project types such as courthouses. However, commercial building and multifamily housing registered particularly severe declines in 2009, and even the previously resilient institutional building sector lost momentum. Going into 2010, more improvement is expected for housing and public works, but commercial and institutional building will continue to be adversely affected by weak employment, tight bank lending, and the eroding fiscal health of states and localities.”
Nonresidential building in December was reported at $145.2 billion (annual rate), unchanged from the previous month, which reflected a mixed performance across the various structure types. On the commercial side, gains were registered by stores and warehouses, up 52% and 15% respectively, compared to very weak activity in November. This was countered by a 32% slide for hotels as well as a 15% drop for offices, which retreated even with groundbreaking for a $91 million office building in Washington DC. The manufacturing plant category in December jumped 143% from a depressed November. On the institutional side, healthcare facilities in December advanced 8%, lifted by groundbreaking for a $140 million hospital in New Mexico and a $135 million medical center in Ohio. Amusement-related projects climbed 56% in December with groundbreaking for a $107 million casino in Pennsylvania and a $95 million indoor arena in Indiana. Reduced activity in December was reported for educational buildings, down 3%; transportation terminals, down 14%; and public buildings, down 60% from an elevated November.
For 2009 as a whole, nonresidential building dropped 33% to $162.4 billion. The commercial sector plunged 47%, much steeper than the 16% drop that took place in 2008. The retail categories were hard-hit in 2009, with stores and shopping centers falling 42% while warehouse construction plummeted 62%. An even larger decline was reported for hotels, down 66%, which included a sharply reduced amount of hotel/casino projects. The office building category in 2009 dropped 37%, less severe than the other commercial categories yet still a substantial downturn. The office decline in 2009 was cushioned to some extent by the start of several large government-related projects, such as the $922 million U.S. Army headquarters complex in Alexandria VA and the $747 million renovation of the United Nations Secretariat Building in New York NY, as well as groundbreaking for several large data centers. The manufacturing plant category in 2009 fell 66%, reflecting in part a decrease in the amount of large oil refinery expansions compared to 2008.
The institutional side of nonresidential building fell 17% in 2009, following a 10% gain in 2008. The most noteworthy decline was healthcare facilities, which retreated 36% compared to the record high in dollar terms achieved in 2008, as hospital chains in 2009 deferred expansion plans amidst tighter credit conditions and the uncertainty arising from the debate over healthcare reform. The educational building category in 2009 dropped 19%, with reduced activity for public school construction as well as colleges and universities. Declines were also reported for churches, down 11%; and amusement-related projects, down 17%. On the plus side, the public buildings category grew 10% in 2009, lifted by a large increase for courthouse projects, which in numerous cases were able to reach groundbreaking as a result of funding provided by the federal stimulus bill. Transportation terminal work in 2009 also advanced, rising 37%, with the boost coming from several large airport terminal projects in California and Nevada, as well as rail terminal work in New York NY.
Residential building in December edged up 1% to $131.3 billion (annual rate), with slight improvement for both single family housing (up 2%) and multifamily housing (up 1%). The gain for single family housing is the continuation of the gradual upward trend that’s been present since April. The December pace for single family housing was still 8% below the monthly average for 2008, and a full 64% below the monthly average in the peak year of 2005. For multifamily housing, the December pace was 54% below the monthly average in 2008 and a full 74% below the monthly average in the peak year of 2006. The December multifamily total featured smaller-scale projects compared to a few years ago, including the December groundbreaking for a $45 million apartment building in Yonkers NY, a $37 million mixed-use building in Milwaukee WI, and a $35 million expansion to a managed care facility in Hamden CT.
The 2009 amount for residential building was $111.4 billion, down 31% from 2008. Single family housing fell 23% in dollar terms, less severe than the 39% drop reported in 2008. The regional pattern for single family housing showed the largest 2009 decline in the South Atlantic, down 30%; followed by the West, down 25%; the Northeast, down 24%; the Midwest, down 21%; and the South Central, down 16%. Multifamily housing in 2009 fell 56% in dollar terms, more pronounced than the 36% drop reported in 2008. The top five markets for multifamily housing in 2009 all showed sharp reductions compared to the prior year – New York NY, down 59%; Chicago IL, down 36%; Washington DC, down 68%; Dallas-Ft. Worth TX, down 56%; and Seattle WA, down 54%.
Nonbuilding construction in December climbed 15% to $149.3 billion (annual rate). The “miscellaneous” public works category, which includes site work and mass transit, soared 57% as the result of two large rail-related projects – a $659 million segment of the East Side Access Tunnel in New York NY and $175 million to rehabilitate the Red Line Metro Rail System in Washington DC. Sewer construction in December advanced 31%, aided by a $215 million upgrade to a water reclamation facility in Florida. Bridge construction climbed 23% in December, helped by the start of two large projects located in New Haven CT ($417 million) and New York NY ($364 million). Rounding out the public works sector was a 17% gain for water supply systems, steady contracting for highway construction, and a 38% decline for river/harbor development. The electric utility category in December increased 27%, featuring the start of four very large projects – a carbon capture upgrade to a power plant in West Virginia ($550 million), a biomass power plant in Texas ($488 million), a solar plant expansion in Nevada ($270 million), and a wind farm in Indiana ($150 million).
For the full year 2009, nonbuilding construction dropped 9% to $137.8 billion, due mostly to a 41% slide for electric utility construction from the record high achieved in 2008. The 2009 volume for electric utilities was still strong by recent standards, coming in as the third highest annual amount over the past ten years. The public works sector in 2009 settled back a slight 1% as the result of a varied pattern by project type. Highway construction (the largest public works category) grew 5%, and bridge construction climbed 10%. Both project types were the beneficiaries of funding provided by the federal stimulus act, and Murray noted that “both would have registered declines in 2009 without the stimulus funding.” River/harbor development work in 2009 jumped 27%, led by several large hurricane rebuilding projects in the Gulf Coast region, such as the $854 million Gulf Intracoast Waterway and the $639 million Chalmette Loop Levee. Sewer and water supply construction lost momentum in 2009, sliding 16% and 15% respectively. The more difficult fiscal climate in 2009 restrained sewer and water supply projects, and there was less benefit from the stimulus funding for this type of construction, relative to highways and bridges. The “miscellaneous” public works category in 2009 retreated 7%, continuing to settle back from the most recent peak in 2007.
The 26% decline for total construction at the national level in 2009 was reflected by similar weakness at the five region level. The steepest reductions were shown by the South Atlantic and the West, each down 27%; followed by the Midwest, down 26%; the South Central, down 25%; and the Northeast, down 24%.
December 2009 Construction Starts
DECEMBER 2009 CONSTRUCTION STARTS
MONTHLY SUMMARY OF CONSTRUCTION STARTS
Prepared by McGraw-Hill Construction Research & Analytics
Monthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of Dollars
| December 2009 | November 2009 | % Change | |
| Nonresidential Building | $145,176 | $145,509 | -0- |
| Residential Building | 131,339 | 129,507 | +1 |
| Nonbuilding Construction | 149,303 | 130,221 | +15 |
| Total Construction | $425,818 | $405,237 | +5 |
The Dodge Index
(2000=100, Seasonally Adjusted)
December 2009 ...................... 90
November 2009 ...................... 86
YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars
| 12 Mo. 2009 | 12 Mo. 2008 | % Change | |
| Nonresidential Building | $162,409 | $242,933 | -33 |
| Residential Building | 111,363 | 161,865 | -31 |
| Nonbuilding Construction | 137,825 | 151,271 | -9 |
| Total Construction | $411,597 | $556,069 | -26 |
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