April Construction Slips One Percent
NEW YORK – May 20, 2013 – New construction starts in April settled back 1% to a seasonally adjusted annual rate of $473.0 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. The public works sector retreated from its elevated pace in March, and housing experienced a slight loss of momentum. Meanwhile, nonresidential building in April showed some improvement after its lackluster performance during the previous two months. On an unadjusted basis, total construction starts in the January-April period of 2013 came in at $141.1 billion, down 5% from the same period a year ago. The 2013 year-to-date amount for total construction was pulled down by a sharply reduced volume of new electric utility starts. If electric utilities are excluded, total construction starts would be up 12% year-to-date, with most of the lift coming from this year’s stronger rate of homebuilding.
The April statistics produced a reading of 100 for the Dodge Index (2000=100), compared to the 101 that was reported for March. For all of 2012, the Dodge Index averaged 100. “Total construction starts during the early months of 2013 have been able to stay close to last year’s average pace, but the moderate upward trend that was present last year has yet to resume,” stated Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “The housing market for the most part has maintained its recent strength, even with a slight pause in April, but new electric utility starts have slowed significantly from last year’s record volume. The boost that had been expected to come in 2013 from nonresidential building is at best only beginning to take hold, as the pickup in April followed weak activity in February and March. One relative bright spot so far in 2013 has been a stronger-than-expected amount of public works construction, although its April downturn may well be a sign of diminished activity to come.”
Nonbuilding construction in April dropped 7% to $130.8 billion (annual rate). The moderate decline followed substantial volatility during the previous two months, with nonbuilding construction soaring 46% in March after plunging 33% in February. The public works portion of nonbuilding construction decreased 15% in April after its heightened March activity, as declines were reported for most of the public works project types. Highway and bridge construction in April retreated 25%, following a 31% jump in March. April’s rate of highway and bridge construction was down 13% from the average pace reported for 2012 as a whole, despite the April start of a $128 million highway project in New Jersey and a $108 million highway project in California. The environmental public works categories weakened considerably in April, with river/harbor development down 13%, sewer systems down 31%, and water supply systems down 35%. Miscellaneous public works, which is comprised of such diverse project types as mass transit and pipelines, was the only public works category to register an April gain, rising 23%. Lifting the miscellaneous public works category in April were three large rail-related projects – an $877 million segment of the RTD Eagle P3 Project in the Denver CO area, the $595 million BART South Bay Extension in San Jose CA, and the $300 million RTD I-225 Light Rail Line in Aurora CO. Electric utility construction in April increased 52% from a very weak March, although the April level of activity was still low by recent standards – down 47% from this category’s average monthly pace during 2012. Large electric utility projects that contributed to the April gain were a $740 million natural gas-fired power plant in New Jersey, a $370 million wind farm in Kansas, and a $270 million gas-fired power plant in Colorado.
Residential building, at $198.0 billion (annual rate), eased back 1% in April. Single family housing in April decreased 1%, and during the past two months it has basically leveled off following the steady increases shown over the past year. The rate of activity for single family housing in April was still elevated by recent standards – up 20% from its average monthly pace during 2012. By region, reduced activity in April was registered by the South Atlantic and the West, each down 5%, which slightly outweighed gains in the South Central, up 1%; the Midwest, up 4%; and the Northeast, up 6%. Multifamily housing in April slipped 2% from the previous month, although like single family housing it was still elevated by recent standards – up 19% from its average monthly pace during 2012. Large projects that supported the multifamily total in April were the following – a $225 million apartment building in New York NY, the $191 million apartment portion of a $240 million mixed-use building in Jersey City NJ, and a $170 million condominium tower in Honolulu HI. Through the first four months of 2013, the top five metropolitan areas in terms of the dollar amount of new multifamily starts were the following – New York NY, Miami FL, Boston MA, Washington DC, and Los Angeles CA.
Nonresidential building in April grew 6% to $144.3 billion (annual rate), showing improvement after a weak March, although still 7% below its average monthly pace during 2012. The commercial segment in April was mixed by project type. Office construction climbed 58%, lifted by the start of the $400 million Prudential Financial Office Tower 1 in Newark NJ. Store construction in April increased 5%, helped by groundbreaking for such projects as a $46 million shopping center in the Bronx NY and a $40 million outlet mall in West Palm Beach FL. On the negative side, warehouse construction in April fell 11%, even with the start of a $70 million distribution center in Bethel PA, while hotel construction dropped 9%. Manufacturing plant construction, which can be volatile on a month-to-month basis, decreased 49% in April. Despite the decline for the category as a whole, manufacturing plant construction did include the April start of a $290 million diesel refinery in North Dakota.
The institutional segment of nonresidential building was also mixed by project type in April. The largest percentage gain was reported for transportation terminals which jumped 238%, with the upward push coming from $258 million for terminal work on the Second Avenue Subway line in New York NY and $100 million for renovation work on Terminal A at Dallas-Ft. Worth International Airport. Healthcare facilities strengthened in April after a weak March, rising 48% with the aid of such projects as an $830 million Stanford University medical center in Palo Alto CA and a $226 million Emory University treatment center in Atlanta GA. Amusement-related work advanced 6% in April, supported by groundbreaking for the $169 million casino portion of a $400 million casino and garage project in Baltimore MD. Educational facilities, the largest nonresidential building category, dropped 19% in April. The latest month did include the start of a $100 million high school modernization in Washington DC, but this was not enough to avert another decline for educational facilities. Weaker activity was also reported in April for public buildings (courthouses and detention facilities), down 17%; and churches, down 27%.
The 5% decline for total construction starts on an unadjusted basis during the first four month of 2013 reflected a steep 33% drop for nonbuilding construction. Although the public works portion of nonbuilding construction was up 10% year-to-date, electric utilities were down 78%. The first four months of 2012 saw an exceptional amount of large electric utility projects reach the construction start stage, led by two nuclear projects – $8.5 billion for Units 3 and 4 at the Vogtle nuclear power facility in Georgia and $8.5 billion for Units 2 and 3 at the V.C. Summer nuclear power facility in South Carolina.
Additional large electric utility projects that reached the construction start stage in the first four months of 2012 included a $1.3 billion gas-fired power plant in Florida, a $1.1 billion gas-fired power plant in Virginia, and a $1.1 billion solar energy complex in California. New electric utility starts achieved a new high in current dollar terms during 2012, and are now pulling back from last year’s record pace. As noted, if electric utilities are excluded from the construction start statistics, then total construction during the first four month of 2013 would be up 12%.
Residential building during the January-April period of 2013 climbed 33% relative to last year, with similar gains for single family housing, up 33%; and multifamily housing, up 34%. Nonresidential building during this year’s January-April period fell 8%, weighed down by a 14% drop for the institutional categories. Commercial building on a year-to-date basis showed no change from last year, while the manufacturing building category was down a slight 1%.
In terms of geography, total construction starts in the first four months of 2013 revealed gains in three regions – the Northeast, up 12%; the South Central, up 10%; and the West, up 6%. Year-to-date declines were reported for two regions – the Midwest, down 1%; and the South Atlantic, down 31%. If electric utilities are excluded from the construction start statistics in the South Atlantic, then that region would register a 22% year-to-date gain.
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