March Construction Improves 8 Percent
NEW YORK – April 19, 2013 – New construction starts in March climbed 8% to a seasonally adjusted annual rate of $475.7 billion, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. The gain for total construction in March followed two months of decline, and was led by a strong increase for the nonbuilding construction sector (public works and electric utilities). At the same time, March witnessed slightly reduced activity for both housing and nonresidential building. During the first three months of 2013, total construction starts on an unadjusted basis came in at $100.5 billion, unchanged from the same period a year ago.
The latest month’s data lifted the Dodge Index to 101 (2000=100), up from a revised 93 for February, and essentially the same as the average rate for the Index during 2012. “After the slowdown in early 2013, the March improvement for total construction is in line with what’s been seen over the past year – that being, an up-and-down pattern around a gradual rising trend,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “The support for total construction in March came from public works and electric utilities, which bounced back from a particularly weak February. Still, both segments are not expected to register much growth for 2013 as a whole, as public works construction is facing federal budget constraints while electric utility construction is pulling back from the record high achieved in 2012. Residential building in March paused from its steady increases over the past year, with growth likely to resume in coming months. The modest decline for nonresidential building in March was consistent with its struggle to establish upward momentum, as the gains for commercial building stay tenuous while institutional building remains in the process of bottoming out.”
Nonbuilding construction in March jumped 42% to $139.9 billion (annual rate). Electric utility construction in March advanced 122% from its depressed February amount, helped especially by the start of a $940 million solar farm in Texas, in combination with such smaller-scale projects as a $90 million biomass-to-energy power plant in Hawaii. The volume of electric utility construction in March was still low by 2012 standards, down 64% from last year’s average monthly pace. The public works categories overall in March were up 36%, rebounding after a 25% decline in February. Water supply construction surged 111%, reflecting the start of six water main replacement projects in Chicago IL totaling $506 million, as well as the start of a $125 million water treatment plant in Colorado. The miscellaneous public works category, which includes such diverse project types as pipelines and rail work, climbed 106% in March. Helping to boost the miscellaneous public works total were such projects as a $710 million natural gas pipeline in Texas and Oklahoma, a $360 million natural gas pipeline in Pennsylvania and New Jersey, and a $167 million subway upgrade in New York NY. Highway and bridge construction in March increased 28%, strengthening after a weak February, with the help of a $488 million highway project in California, a $188 million bridge replacement project in Minnesota, and a $125 million bridge replacement project in Missouri. Murray noted, “The federal-aid highway program was largely exempt from the impact of the sequester, and the start of several major projects in 2013 should make it possible for highway and bridge construction to register a full year gain.” Two public works categories experienced declines for March – sewer systems, down 14%; and river/harbor development, down 16%.
Residential building, at $199.6 billion (annual rate), slipped 1% in March. Multifamily housing pulled back 2% after a strong February, which still kept the level of construction for this category 20% above its average monthly pace reported during 2012. Large multifamily projects that reached groundbreaking in March included a $192 million apartment complex in Long Island City NY, the $125 million condominium portion of a $210 million hotel/condominium tower in Chicago IL, and an $83 million apartment tower in Los Angeles CA. Through the first three months of 2013, the top metropolitan area in terms of the dollar amount of new multifamily starts was New York NY, followed by Austin TX, Dallas-Ft. Worth TX, Miami FL, and Washington DC. Single family housing in March held steady with its February volume, while maintaining a 22% lead over its average monthly pace reported during 2012. The regional pattern for single family housing in March showed gains for the Northeast, up 7%; and the West, up 2%; but declines for the South Central, down 1%; the South Atlantic, down 2%; and the Midwest, down 4%.
Nonresidential building in March dropped 2% to $136.2 billion (annual rate), as the commercial categories generally fell back from recent gains. Office construction in March retreated 34% after its improved February amount, even with groundbreaking for such projects as a $90 million office tower in McLean VA and a $72 million office and research campus in Sunnyvale CA. Store construction in March fell 19%, and hotel construction dropped 18% despite the start of the $69 million hotel portion of the $210 million hotel/condominium tower in Chicago IL. Warehouse construction was the one commercial category to register a March gain, climbing 45% with the boost coming from the start of a $130 million Amazon distribution center in New Jersey.
The institutional categories were mixed in March. Education-related buildings improved 4%, helped by the March start of a $68 million primary school in Queens NY, a $66 million high school in Wilmington MA, and a $65 million academic building for the University of Massachusetts in Dorchester MA. Healthcare facilities in March climbed 21%, reflecting groundbreaking for a $110 million hospital in Braselton GA and a $90 million medical center in Cape Girardeau MO. On the negative side, declines were reported in March for amusement-related projects, down 5%; public buildings (courthouses and detention facilities), down 21%; and transportation terminals, down 23%. The manufacturing plant category in March provided support to the nonresidential building total, jumping 175% after a very weak February, with the lift coming from the start of a $500 million blood plasma fractionation plant in Georgia.
The “no change” for total construction starts on an unadjusted basis for the first three months of 2013 relative to last year was due to varied behavior by the major construction sectors. Residential building registered healthy year-to-date growth, climbing 33% with similar gains for single family housing, up 33%; and multifamily housing, up 32%. Nonresidential building in the January-March period of 2013 dropped 9%, reflecting an 18% decline for the institutional categories. On the plus side for nonresidential building, the commercial categories were up 2% year-to-date while manufacturing plant construction grew 20%. Nonbuilding construction in the first three months of 2013 fell 23%, as a 75% plunge for electric utilities outweighed a 19% gain for public works. The year-to-date decline for electric utilities reflects the comparison to a robust amount of electric utility starts in first three months of 2012, which included $8.5 billion for Units 3 and 4 at the Vogtle nuclear power facility in Georgia. If the electric utility category is excluded from the year-to-date comparisons, then total construction in the first three months of 2013 would be up 14%.
In terms of geography, total construction starts in the January-March period of 2013 showed gains in three regions – the Northeast, up 20%; the South Central, up 14%; and the West, up 3%. Year-to-date declines were reported in two regions – the Midwest, down 1% and the South Atlantic, down 22% (which was due to a steep reduction for that region’s new electric utility starts compared to last year).
Added perspective comes from looking at twelve-month moving totals, in this case the twelve months ending March 2013 versus the twelve months ending March 2012. On this basis, total construction starts were up 6%, as the result of a 32% increase for residential building combined with 5% declines for both nonresidential building and nonbuilding construction. By region, the twelve months ending March 2013 showed this pattern for total construction – the South Central, up 16%; the Northeast, up 11%; the Midwest, up 8%; the South Atlantic, up 1%; and the West, down 2%.
About McGraw Hill Construction:
McGraw-Hill Construction connects people, projects, and products across the construction industry. For more than a century, it has remained North America’s leading provider of project and product information, plans and specifications, and industry news, trends, and forecasts. McGraw-Hill Construction serves more than one million customers in the global construction industry through Dodge, Sweets, Architectural Record, Engineering News-Record, GreenSource, and SNAP. To learn more, visit www.construction.com or follow @mhconstruction on Twitter.
About The McGraw Hill Companies:
The McGraw-Hill Companies (NYSE: MHP), a financial intelligence and education company, signed an agreement to sell its McGraw-Hill Education business to investment funds affiliated with Apollo Global Management, LLC in November 2012. Following the sale closing, expected in early 2013, the Company will be renamed McGraw Hill Financial (subject to shareholder approval) and will be a powerhouse in benchmarks, content and analytics for the global capital and commodity markets. The Company's leading brands will include: Standard & Poor's, S&P Capital IQ, S&P Dow Jones Indices, Platts, Crisil, J.D. Power and Associates, McGraw-Hill Construction, and Aviation Week. The Company will have approximately 17,000 employees in more than 30 countries. Additional information is available at www.mcgraw-hill.com.