New construction starts in March retreated 13 percent from the previous month to a seasonally adjusted annual rate of $633.3 billion, according to Dodge Data & Analytics. The decline followed strong gains in January (up 9 percent) and February (up 17 percent), when construction was lifted by the start of several massive projects valued each in excess of $1 billion, including four liquefied natural gas (LNG) terminal projects, a petrochemical plant, and a solar power facility.
Year-to-date, construction starts are up by a large amount.
While the March statistics did include the start of a $2.3 billion highway project in Florida, the boost coming from projects in excess of $1 billion was substantially less than what occurred during the first two months of the year.
By major sector, March showed diminished activity for nonresidential building and nonbuilding construction, while residential building held steady. If projects in excess of $1 billion are excluded, the result for total construction starts would be a 4 percent gain in March on a seasonally adjusted basis relative to February, and an 11 percent gain for the first three months of 2015 on an unadjusted basis relative to the same period a year ago.
“The presence of unusually large projects will affect the month-to-month pattern for construction starts, and that’s certainly been true during the early months of 2015,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The elevated activity in February exceeded the underlying trend for construction starts, and the March pullback returns activity to a more sustainable pace, at the same time showing an industry that’s still in the midst of expansion. While nonresidential building lost some momentum in March, the broad pattern over recent months reveals more growth for commercial building combined with strengthening for several institutional structure types, most notably school construction. Although there’s concern that public works construction will be dampened by the uncertainty caused by the soon-to-expire federal transportation legislation, a healthy amount of highway and bridge work has reached the construction start stage so far in 2015. And, while residential building still awaits renewed upward progress by single family housing, the multifamily side of the housing market continues to strengthen, as low vacancies and rising rents in numerous markets provide the justification for more construction.”
Nonresidential building in March fell 19 percent to $183.5 billion (annual rate), after surging 43 percent in February. The manufacturing building category in March plunged a steep 57 percent from its elevated February pace. Although March did feature the start of several large manufacturing projects, such as a $751 million polyethylene plant and a $150 million cement plant expansion, both located in Texas, the prior month had included the start of a $3.0 billion ethane cracker and propane dehydrogenation plant, also located in Texas.
The commercial building group in March settled back 10 percent, after climbing 20 percent in February. Office construction registered a 20 percent slide in March, although the latest month did include the start of several noteworthy projects, including the $225 million expansion of the Nike headquarters in Beaverton, Ore., the $120 million Bristol-Myers Squibb office building in Lawrenceville, N.J., and the $82 million office portion of the $100 million Exchange Plaza mixed-use project in San Francisco.
Also reporting a double-digit decline in March was warehouse construction, which fell 26 percent. Hotel construction, down 1 percent, held virtually steady in March, as it benefitted from the groundbreaking of the $203 million Fairmont Austin Convention Hotel in Austin, Texas, and a $67 million Courtyard by Marriott hotel in New York. Store construction was the one commercial structure type able to report a March gain, rising 13 percent after a lackluster February.
The institutional building group in March retreated 9 percent following its 20 percent jump in February. The healthcare facilities category plunged 40 percent after an unusually strong February, returning to a level more consistent with its sluggish performance of recent years. Educational buildings slipped 11 percent in March, although the latest month did include groundbreaking for Cornell University’s first academic building on Roosevelt Island in New York, as part of the Cornell NYC Tech campus development.
Large public school buildings that reached the construction start stage in March included a $68 million K-12 facility in Brooklyn, N.Y., a $66 million high school replacement in Federal Way, Wash., and a $50 million high school renovation in Chicago. For the smaller institutional categories, weaker activity was reported by public buildings (courthouses and detention facilities), down 5 percent, while the remaining institutional structure types posted increases for March – transportation terminals, up 33 percent; amusement-related work, up 52 percent; and religious buildings, up 71 percent from a depressed February. Groundbreaking for a $78 million church in Leawood, Kan., helped to lift the religious building amount for March.
Nonbuilding construction, at $198.5 billion (annual rate), dropped 22 percent in March. A steep plunge for the electric utility and gas plant category, down 73 percent, was entirely responsible for the latest month’s nonbuilding decline.
In February, the electric utility and gas plant category had included the $8.4 billion Sempra LNG export terminal in Louisiana and the $1.2 billion Stateline Solar Farm in California. While there were several large electric utility and gas plant projects entered as March starts, such as a $500 million upgrade to a gas-fired power plant in Texas, they were considerably smaller in scale than the large projects entered as February starts.
By contrast, the public works categories showed across-the-board gains in March. Highway and bridge construction surged 30 percent, led by the start of the $2.3 billion I-4 upgrade in central Florida. For the first three months of 2015, the top five states ranked by the dollar amount of new highway and bridge construction were – Florida, Texas, New York, California, and Illinois.
The miscellaneous public works category, which includes such diverse project types as site work and pipelines, soared 86 percent in March, led by $400 million related to site work at the Sasol ethylene cracker and derivatives complex in Louisiana and a $300 million petroleum pipeline in Texas. For the environmental categories, the March increases were as follows – river/harbor development, up 33 percent; water supply systems, up 16 percent; and sewer systems, up 1 percent.
Residential building in March was reported at $251.4 billion (annual rate), essentially even with the previous month. Single-family housing edged up a slight 1 percent, due to a mixed pattern by major region – the Northeast, up 19 percent; the Midwest, up 4 percent; the South Central, up 1 percent; and the South Atlantic and the West, each down 1 percent.
In effect, there’s not been much change from the flat pattern for single-family housing at the U.S. level that emerged during 2014, following strong percentage growth in both 2012 (up 29 percent) and 2013 (up 27 percent).
Multifamily housing in March receded 4 percent, staying close to the heightened amount achieved in February when a 45 percent increase was reported. There were nine multifamily projects valued at $100 million or more that reached groundbreaking during March, with the top four located in the New York metropolitan area – two in Brooklyn valued at $385 million and $197 million respectively, and two in Manhattan valued at $168 million and $150 million respectively.
Year-to-Date: Big Jump
For the first three months of 2015, total construction starts on an unadjusted basis were up 28 percent from the same period a year ago.
The 28 percent jump during the first three months of 2015 for total construction starts on an unadjusted basis compared to last year reflected growth for all three major construction sectors.
Nonresidential building year-to-date increased 10 percent, with commercial building up 6 percent, manufacturing building up 10 percent, and institutional building up 12 percent.
Nonbuilding construction year-to-date soared 74 percent, with electric utilities and gas plants up 464 percent and public works up 13 percent.
Residential building year-to-date advanced 12 percent, with single family housing up 11 percent and multifamily housing up 17 percent.
Through the first three months of 2015, the top five metropolitan markets ranked by the dollar volume of multifamily projects were as follows – New York, Miami, Boston, Washington, D.C., and Houston. The New York metropolitan area during this time comprised 23 percent of the U.S. multifamily construction dollar amount. By comparison, the next four metropolitan areas combined comprised 20 percent of the U.S. multifamily construction dollar amount during this time.
By geography, total construction starts during the January-March period of 2015 showed this performance – the South Central, up 98 percent; the South Atlantic, up 17 percent; the Northeast, up 10 percent; the West, up 1 percent; and the Midwest, unchanged from a year ago.
Additional perspective comes from looking at 12-month moving totals, in this case the 12 months ending March 2015 versus the 12 months ending March 2014. On this basis, total construction starts were up 13 percent, as a result of this behavior by major sector – nonresidential building, up 22 percent; residential building, up 11 percent; and nonbuilding construction, up 6 percent.
By geography, the 12 months ending March 2015 revealed the following for total construction starts versus the prior 12 months – the South Central, up 32 percent; the South Atlantic, up 16 percent; the West, up 7 percent; and the Midwest and Northeast, each up 3 percent.