By Mark S. Kuhar
At a seasonally adjusted annual rate of $421.3 billion, new construction starts in November fell 5 percent from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The downturn came as the result of decreased activity for public works, following this sector’s elevated amount in October. Meanwhile, both nonresidential building and housing registered modest growth in November. During the first 11 months of 2012, total construction starts on an unadjusted basis were reported at $424.4 billion, up 3 percent compared to the same period a year ago.
Highway construction in November dropped 8 percent, sliding back after being lifted in October by the start of work on the I-95 HOV/HOT Lanes project in Virginia. Bridge construction was the only public works category to post a November gain, climbing 12 percent with the help of a $245 million bridge replacement project in Quincy, Mass.
The November data lowered the Dodge Index to 89 (2000=100), down from a revised 94 for October. Over the first eleven months of 2012, the Dodge Index averaged 97.
“The current year has seen an up-and-down pattern for construction starts, and November qualifies as one of this year’s weaker months,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Much of the recent variation has been related to unusually large projects in a given month, and the absence of such projects in November for public works and electric utilities contributed to the slowdown for overall construction. At the same time, nonresidential building in November showed improvement after its loss of momentum during the prior two months, and housing continues to strengthen.”
Nonbuilding construction in November dropped 24 percent to $100.6 billion (annual rate), retreating to its lowest amount so far in 2012. The environmental public works categories in November were particularly weak, with large declines for sewer construction, down 21 percent; river/harbor development, down 29 percent; and water supply systems, down 37 percent.
The “miscellaneous public works” category, which is comprised of such diverse project types as pipelines, mass transit, and outdoor sports stadiums, fell 56 percent in November. Miscellaneous public works had been boosted in October by $2.0 billion related to work on the Keystone Pipeline Gulf Coast Expansion (located in Oklahoma and Texas); by contrast, the largest miscellaneous public works project in November was a $70 million stadium addition at Louisiana State University in Baton Rouge, La.
The electric utility category in November weakened further, dropping 8 percent after a steep 93 percent plunge in October. Due to the strength reported earlier in the year, the electric utility category in 2012 has already achieved a new annual high in current dollars, even with the depressed activity reported for October and November.
During the first eleven months of 2012, nonbuilding construction was up 1 percent from the same period a year ago. While public works construction year-to-date was down 1 percent, it was offset by a 4 percent gain for electric utilities. Four of the six public works categories showed year-to-date declines – bridge construction, down 3 percent; highways, down 9 percent; sewer construction, down 12 percent; and river/harbor development, down 21 percent. The two public works categories reporting year-to-date increases were water supply systems, up 7 percent; and miscellaneous public works, up 41 percent. The large gain for miscellaneous public works reflected a sharp rise in the amount of pipeline and rail-related work.
Nonresidential building, at $136.8 billion (annual rate), climbed 4 percent in November. The institutional sector, which had been trending downward throughout much of 2012, strengthened in November. The educational building category advanced 16 percent, helped by such projects as a $180 million medical research facility in Cincinnati, an $88 million building renovation at the University of Chicago in Chicago, and an $87 million high school in Franklin, Mass.
Healthcare facilities in November climbed 13 percent, reflecting the lift coming from the $651 million Veterans Administration Medical Center in New Orleans and a $145 million hospital in Rochester, N.Y. Other gains in November were reported for amusement-related projects, up 19 percent; and transportation terminal work, up 16 percent. Declines in November were reported for public buildings (courthouses, detention facilities, and military projects), down 48 percent; and churches, down 3 percent.
The commercial categories generally lost momentum in November, even with the start of several noteworthy projects. Office construction retreated 5 percent, although November did include groundbreaking for a $125 million office building in Boston and a $68 million data center for Apple in Prineville, Ore.
Store construction in November retreated 7 percent, even with the start of an $85 million outlet mall in Chesterfield, Mo., while warehouse construction dropped 15 percent. Hotel construction in November was down 19 percent, yet the month did include the start of a $183 million hotel project at Denver International Airport. The manufacturing plant category in November jumped 153 percent from an exceptionally weak October, although November’s pace was still 42 percent below the average reported for this category during the first nine months of 2012.
For the January-November period of 2012, nonresidential building was down 13 percent relative to the same period a year ago. The institutional sector fell 14 percent, as weaker activity was reported for its two largest categories – educational buildings, down 15 percent; and healthcare facilities, down 12 percent.
Other institutional declines on a year-to-date basis were the following – public buildings, down 10 percent; churches, down 23 percent; and amusement-related projects, down 24 percent. The manufacturing plant category year-to-date plummeted 45 percent, reflecting the comparison to 2011 which included a $3.0 billion coal-to-gasoline plant and two large semiconductor plants.
The commercial sector year-to-date managed to increase 2 percent, lifted by increases for stores, up 8 percent; warehouses, up 9 percent; and hotels, up 20 percent. Office construction year-to-date was down 14 percent, due in part to the comparison to 2011, which included the start of a $1.1 billion government data center in Utah. While the dollar amount for nonresidential building was down 13 percent for the first eleven months of 2012, square footage for nonresidential building was up 2 percent during this time.
Residential building in November grew 3 percent to $183.9 billion (annual rate). Single family housing held steady, maintaining the improved activity reached in October, while multifamily housing climbed 17 percent. The multifamily increase in November was supported by the start of four condominium/apartment projects valued each at $100 million or more, located in Miami ($131 million), Boston ($116 million), Chicago ($107 million), and New York ($100 million).
During the first 11 months of 2012, residential building advanced 28 percent compared to the same period a year ago. Single family housing climbed 29 percent, as the result of this year-to-date performance by geography – the West, up 41 percent; the Midwest, up 30 percent; the South Atlantic, up 27 percent; the South Central, up 23 percent; and the Northeast, up 14 percent.
Multifamily housing rose a similar 27 percent, as the result of this year-to-date performance by geography – the West, up 40 percent; the South Atlantic, up 31 percent; the South Central, up 26 percent; the Northeast, up 25 percent; and the Midwest, up 12 percent.
The top five metropolitan areas in terms of the dollar amount of multifamily starts were – New York, up 33 percent; Washington, D.C., up 6 percent; Miami, up 144 percent; Los Angeles, up 29 percent; and Boston, up 21 percent. The large increase for multifamily housing in the West was helped by the 29 percent gain for Los Angeles, as well as growth in such metropolitan areas as Seattle, up 51 percent; San Francisco, up 23 percent; Denver, up 114 percent; and Portland, Ore., up 79 percent.
The 3 percent pickup for total construction starts at the national level during the first 11 months of 2012 was the result of a mixed performance at the five region level. Leading the way was the South Atlantic, up 20 percent, with much of the upward push coming from the start of two massive nuclear power projects in Georgia and South Carolina.
If these two projects are excluded, then total construction in the South Atlantic would be down 1 percent. Year-to-date gains for total construction were also reported for the South Central and the Midwest, each up 7 percent. Year-to-date declines for total construction were reported for the Northeast, down 5 percent; and the West, down 10 percent.