New construction starts in June grew 4 percent from the previous month to a seasonally adjusted annual rate of $679.9 billion, according to Dodge Data & Analytics. Nonresidential building increased 13 percent in June, strengthening after two months of lackluster activity, and the nonbuilding construction sector rose 8 percent with the help of elevated activity for electric utilities. However, residential building slipped 4 percent in June, as both sides of the housing market (single-family and multifamily) retreated.
Since last year, total construction starts have shown an up-and-down pattern on a quarterly basis, including a 6 percent decline in the fourth quarter of 2016, which was then followed by a 7 percent increase in this year’s first quarter and now a 10 percent decline in the second quarter.
“A maturing construction expansion is characterized by deceleration in the overall rate of growth, that’s often accompanied by up-and-down behavior on a quarterly or monthly basis,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The 11 percent to 12 percent yearly increases for total construction starts during the 2012-2015 period were followed by a 4 percent gain in 2016, and several factors suggest that 2017 should still see modest growth for the year as a whole. These factors include commercial vacancy rates that remain low as well as greater construction funding coming from the state and local bond measures passed in recent years. At the same time, it’s become apparent that any impact from a new federal infrastructure program, should one get passed during the latter half of 2017, would benefit construction more in 2018 and 2019.”
Nonresidential Building
Nonresidential building in June was $249.6 billion (annual rate), up 13 percent from May. The commercial categories as a group climbed 23 percent, led by an 83 percent surge for new office building starts. There were 8 office projects valued at $100 million or more that reached groundbreaking in June, led by a $585 million Facebook data center in the Omaha, Neb., area; the $400 million office portion of the $500 million renovation of the Willis Tower in Chicago (involving remodeling of the structure’s base and observation deck); and the $334 million office portion of the $600 million Diridon Station mixed-use complex in San Jose, Calif.
The other commercial categories lost momentum in June, with stores and shopping centers, down 2 percent; warehouses, down 19 percent; and commercial garages, down 31 percent. The manufacturing building category in June increased 35 percent, lifted by the start of a $1.8 billion methane plant in Louisiana as well as groundbreaking for such projects as a $150 million pyrogenic silica plant in Tennessee and a $143 million pharmaceutical research laboratory in Missouri.
The institutional categories as a group were unchanged in June compared to May. On the plus side, educational facilities rose 16 percent in June, led by the $160 million renovation of the Martin Luther King Jr. Memorial Library in Washington, D.C.; a $125 million high school in Stratford, Conn.; and a $114 million high school in Millville, N.J.
The amusement and recreational category surged 58 percent in June, reflecting the start of the $193 million renovation of the Philips Arena in Atlanta; the $175 million casino portion of the Hard Rock Hotel and Casino renovation in Atlantic City, N.J.; and the $156 million casino portion of the Seminole Hard Rock Hotel and Casino expansion in Hollywood, Fla.
The public buildings category (courthouses, detention centers) and transportation terminals also contributed with June gains, rising 16 percent and 10 percent respectively. However, healthcare facilities plunged 39 percent in June, pulling back after a 40 percent hike in May. The religious buildings category also retreated in June, falling 38 percent.
Nonbuilding Construction
Nonbuilding construction, at $155.4 billion (annual rate), increased 8 percent in June. The electric utility/gas plant category ran counter to its generally declining trend this year, with June soaring 78 percent. Large electric utility projects included as June starts were a $1.3 billion natural gas-fired power plant in Florida, a $1.1 billion wind farm and transmission line in Colorado and a $296 million wind farm in Texas.
The public works categories as a group dropped 6 percent in June, making a partial retreat after a 26 percent jump in May. The miscellaneous public works category, which includes such diverse project types as site work, pipelines and mass transit, fell 16 percent in June.
Although June included $1.4 billion for work on the high-speed rail line project in central California, May had featured the start of several large natural gas pipeline projects, such as the $1.5 billion Revolution Pipeline expansion in western Pennsylvania and the $690 million Gulf South Coastal Bend Header Pipeline in Texas.
Highway and bridge construction in June decreased 7 percent, although the latest month did include the $396 million Interstate 95 Scudder Falls Bridge replacement project over the Delaware River in New Jersey and Pennsylvania. During the first half of 2017, the top five states in terms of the dollar amount of new highway and bridge construction starts were – California, Florida, Texas, Pennsylvania and Georgia.
Two of the environmental public works categories registered gains in June, with water supply construction, up 37 percent; and river/harbor development, up 14 percent. The river/harbor development category was boosted by $350 million for Superfund remedial action at the New Bedford, Mass., harbor. Sewer construction, the third environmental public works category, receded 1 percent in June.
Residential Building
Residential building was $274.9 billion (annual rate) in June, down 4 percent. Single-family housing slipped 4 percent, continuing to settle back in June from the strengthening that took place during the first two months of 2017. June’s pace for single-family housing was still 3 percent above the average monthly amount reported during 2016.
Multifamily housing in June dropped 7 percent, sliding back for the third month in a row. Large multifamily projects that reached groundbreaking in June were led by a $287 million apartment complex in Anaheim, Calif.; a $185 million apartment building in New York; and a $164 million condominium complex in Pompano Beach, Fla.