NEW YORK – May 21, 2015 – The value of new construction starts in April increased 10% from the previous month to a seasonally adjusted annual rate of $698.7 billion, according to Dodge Data & Analytics. The nonresidential building sector came in particularly strong, lifted by the inclusion of two massive projects as April starts – an $8.1 billion petrochemical plant in Louisiana and a $1.2 billion office/retail high-rise in New York NY. Meanwhile, residential building slipped in April, and nonbuilding construction lost momentum as the result of a pullback by public works. Through the first four months of 2015, total construction starts on an unadjusted basis were reported at $208.2 billion, up 24% from the same period a year ago. The current year has so far witnessed the start of eight massive projects valued each in excess of $1 billion, compared to four such projects during the corresponding period of 2014. Excluding projects in excess of $1 billion, the result for total construction starts would be a 3% decline in April on a seasonally adjusted basis compared to March, and a 10% gain during the first four months of 2015 on a raw (unadjusted) basis compared to last year.
The April statistics raised the Dodge Index to 148 (2000=100), compared to 134 in March. For the full year 2014 the Dodge Index averaged 124. “The presence of unusually large projects in early 2015, particularly several liquefied natural gas (LNG) terminals and several petrochemical plants, has elevated the level of activity shown by total construction starts beyond the underlying trend,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “It’s also increased the volatility on a month-to-month basis, with total construction up 16% in February, down 13% in March, and now up 10% in April. Despite these wide swings on a monthly basis, it’s still possible to identify several aspects of how the construction expansion is proceeding in 2015. For nonresidential building, the upturn is broadening in scope, with its institutional segment continuing the upward movement established in 2014. For residential building, single family housing has shown some improvement yet remains hesitant, while multifamily housing is generally proceeding at a healthy clip. For nonbuilding construction, the electric power and gas plant segment has provided a substantial near term boost that will soon recede, while public works is beginning to face constraints after surprisingly resilient activity in early 2015.”
Nonresidential building in April jumped 58% to $288.9 billion (annual rate). Much of the lift came from the manufacturing plant category, which soared 516% due to $8.1 billion estimated for the Sasol ethylene cracker and derivatives complex in Louisiana. If this massive project is excluded, the manufacturing plant category in April would have been down 34%, while total nonresidential building would have seen a more moderate increase of 5%. Aside from the Sasol project, the manufacturing plant category in April included the start of two tire manufacturing plants, one in Tennessee at $384 million and another in South Carolina at $150 million, as well as a $300 million ammonia production facility in Wyoming. The commercial building group in April grew 11%, rebounding after a 10% decline in March. The office building category surged 50%, reflecting $1.0 billion for the office portion of a $1.2 billion high-rise at the Hudson Yards development in New York NY. Other large office projects reported as April starts were a $149 million office building renovation in New York NY, a $90 million office building in Sunrise FL, an $80 million office building renovation in Des Moines IA, and a $77 million renovation project at the Harry S. Truman Federal Building (for the State Department) in Washington DC. Store construction in April improved 2%, with support coming from $230 million for the retail portion of the Hudson Yards high-rise in New York. Warehouse construction in April climbed 17% after a weak March, but hotel construction dropped 23%.
The institutional building group in April grew 7%, bouncing back after an 8% slide in March. Educational facilities increased 9%, helped by such projects as a $132 million building addition at Texas A&M University in College Station TX, a $99 million public school renovation in New York NY, and a $90 million facility at Omaha Metropolitan Community College in Omaha NE. Through the first four months of 2015, the top five states in terms of new educational facility starts were – Texas, New York, California, Georgia, and Connecticut. The transportation terminal category jumped 33% in April, reflecting the start of a $405 million renovation project at Grand Central Terminal in New York NY and $403 million for airport terminal work at Orlando International Airport in Orlando FL. Healthcare facilities advanced 18% after a weak March, helped by groundbreaking for a $225 million hospital in Gainesville FL and a $100 million addition to a medical center in Omaha NE. The amusement and recreational category registered a 15% gain in April, boosted by the start of a $450 million sports arena for the Detroit Red Wings in Detroit MI. Losing momentum in April were public buildings (courthouses and detention facilities), down 21%; and religious buildings, down 57%.
Residential building, at $245.1 billion (annual rate), slipped 3% in April. Single family housing retreated 4% following its slight gain in March, still holding to the sluggish performance that took hold at the end of 2013. By geography, single family housing in April experienced diminished activity in the South Central, down 12%; and the West, down 5%; while the South Atlantic held steady and modest gains were reported in the Midwest, up 2%; and the Northeast, up 3%. Multifamily housing in April eased back 2%, retreating slightly for the second straight month after a 40% surge in February. In April there were nine multifamily projects valued at $100 million or more that reached groundbreaking, led by $563 million for the multifamily portion of a $600 million multifamily/retail building in New York NY. Of these nine projects, seven were located in the New York NY metropolitan area while the other two were located in Seattle WA and Dallas TX. Through the first four months of 2015, the top five metropolitan areas in terms of the dollar amount of multifamily starts were the following – New York NY, Miami FL, Boston MA, Washington DC, and Seattle WA. During this time, the New York NY metropolitan area comprised 29% of the national multifamily total, while the next four metropolitan areas together comprised 18% of the national multifamily total.
Nonbuilding construction in April dropped 17% to $164.7 billion (annual rate). Following a sharp 33% gain in March, the public works categories as a group retreated 26%. Highway and bridge construction pulled back 31%, after being lifted in March by the start of the $2.3 billion I-4 upgrade in central Florida. Compared to March, the large highway and bridge projects in April were smaller in scale, such as the $260 million upgrade to I-84 in Waterbury CT. The environmental public works categories in April showed a reduced level of starts, with water supply systems down 20%, sewer construction down 27%, and river/harbor development down 34%. The miscellaneous public works category (which includes such diverse project types as mass transit, site work, outdoor sports arenas, and pipelines) decreased 8% in April following heightened activity in March. Even with its April decline, the miscellaneous public works category did include $690 million for the start of rail-related work for the segment of the California high-speed rail project located in the Fresno CA area. In contrast to the downturn for public works in April, the electric utility and gas plant category strengthened 25% after a steep 73% plunge in March. Large electric power projects that were reported as April starts included a $1.0 billion solar power facility in Blythe CA and an $800 million natural gas-fired power plant in Carrollton OH. There were also four large wind power projects included as April starts, with two located in Colorado (valued at $400 million and $200 million respectively), one in New Mexico ($430 million), and one in Oklahoma ($400 million).
The 24% increase for total construction starts on an unadjusted basis during the first four months of 2015 was the result of growth for all three major construction sectors. Nonresidential building year-to-date advanced 12%, with manufacturing building up 40%, institutional building up 8%, and commercial building up 2%. Residential building year-to-date was also up 12%, with multifamily housing up 15% and single family housing up 11%. Nonbuilding construction year-to-date jumped 62%, with electric utilities and gas plants up 375% and public works up 12%. The sharp increase for nonbuilding construction year-to-date was largely the result of four massive LNG terminal projects reported as construction starts in January and February. By geography, total construction starts during the January-April period of 2015 performed as follows – the South Central, up 72%; the Northeast, up 15%; the South Atlantic, up 13%; the Midwest, up 6%; and the West, up 4%.
Useful insight comes from looking at twelve-month moving totals, in this case the twelve months ending April 2015 versus the twelve months ending April 2014. On this basis, total construction starts were up 13%, as a result of this behavior by major sector – nonresidential building, up 19%; residential building, up 11%; and nonbuilding construction, up 8%. By geography, the twelve months ending April 2015 revealed the following for total construction starts versus the prior twelve months – the South Central, up 29%; the South Atlantic, up 16%; the West, up 8%; the Northeast, up 5%; and the Midwest, up 3%.
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