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New Construction Starts Improve 5 Percent


Highway Construction Jumps 19 Percent for December; Large Bridge Project Starts.

New construction starts in December grew 5 percent to a seasonally adjusted annual rate of $554.5 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. Although both nonresidential building and housing settled back during the final month of 2013, the nonbuilding construction sector (public works and electric utilities) finished the year on a strong note.

Highway construction was up 19 percent.

In December, large projects that were entered as construction starts included the $1.5 billion Goethals Bridge replacement project in New York and New Jersey, two large natural gas-fired power plants, and two large manufacturing plants.

Nonresidential Building
Nonresidential building in December slipped 7 percent to $168.6 billion (annual rate), pulling back for the second month in a row after its elevated pace in October, although its fourth quarter average was still 17 percent above what was reported in the first quarter.

Several commercial categories in December paused from the improved activity registered earlier in the fall. New office construction dropped 44 percent from November which had been lifted by the start of such projects as the $336 million Transbay office tower in San Francisco; in contrast, the largest office projects entered as December starts were an $80 million office complex in Cary, N.C., and a $73 million data center in West Des Moines, Iowa.

Similar December declines were registered by hotels, down 42 percent; and warehouses, down 46 percent; although the latest month did include the start of an $88 million Amazon distribution center in Windsor, Conn. Store construction, which was the one commercial category that did not post a November gain, managed to increase 6 percent in December.

The December pause for nonresidential building was cushioned by a sharp 110 percent jump for manufacturing buildings, which reflected the start of two massive chemical plants in Louisiana, each valued at $500 million. The institutional building categories in December were mixed.

Educational facilities grew 5 percent, helped by the start of a $213 medical research building in Boston and a $151 million college science building in Chicago. Healthcare facilities in December jumped 30 percent from the prior month’s subdued amount, and featured groundbreaking for an $80 million hospital in Virginia and a $70 million cancer center in Wisconsin.

The smaller institutional categories generally weakened in December, with public buildings (courthouses and detention facilities) down 32 percent; churches, down 44 percent; and amusement-related work, down 46 percent (compared to the previous month which included the $763 million Vikings Multipurpose Stadium in Minneapolis).

The transportation terminal category retreated a slight 1 percent in December, and included the start of a $230 million terminal renovation project at Los Angeles International Airport.

EconomicsResidential Building
Residential building in December dropped 6 percent to $205.3 billion (annual rate), with both sides of the housing market easing back. Single-family housing slipped 3 percent, as recent months have shown more of an up-and-down pattern after the consistently steady gains witnessed earlier in the year.

When viewed on a quarterly basis, single-family housing still registered consistent growth during 2013, with the fourth quarter up 8 percent compared to the first quarter. Multifamily housing in December retreated 13 percent after November’s increase of the same magnitude.

December’s largest multifamily projects were smaller in scale than what had been reported in the previous month, but still included such substantial entries as a $159 million apartment building in Sunny Isles Beach, Fla., a $128 million condominium tower in Honolulu, and a $127 million apartment building in Brooklyn, N.Y.

Nonbuilding Construction
Nonbuilding construction in December soared 40 percent to $180.6 billion (annual rate), which was the highest monthly rate during 2013. Bridge construction jumped 210 percent, boosted by the $1.5 billion Goethals Bridge replacement project in Staten Island, N.Y., and Elizabeth, N.J.

Other large bridge projects that were entered as December starts were $380 million for bridge construction in Stillwater, Minn., and $297 million for bridge construction on the I-35W reconstruction project in Texas.

The highway construction category also had a strong December, rising 19 percent with the help of $693 million allocated to highway work on the I-35W project in Texas.

River/harbor development in December rose 21 percent, supported by the start of a $290 million seawall replacement project in Seattle. Sewer construction in December increased a moderate 6 percent, while water supply construction fell 6 percent.
The miscellaneous public works category (which includes such diverse project types as pipelines, mass transit, and outdoor sports stadiums) dropped 14 percent in December, although it did include a $425 million stadium renovation project for Texas A&M University in College Station, Texas. The electric utility category in December departed from its generally downward trend during 2013, rising 127 percent.

Large power plant projects included as December construction starts were two natural gas-fired plants located in New Jersey ($842 million) and Pennsylvania ($800 million), as well as three wind power facilities located in Texas ($300 million and $200 million) and Oklahoma ($225 million).

 

Full-Year 2013 Report

For 2013 as a whole, total construction starts advanced 6 percent to $516.8 billion. This follows the 10 percent gain reported for 2012 (which drew support from a record amount of new electric utility starts that year) and modest 2 percent gains in both 2010 and 2011. If the volatile electric utility category is excluded, total construction starts in 2013 would be up 14 percent, following a 9 percent gain in 2012 and essentially flat activity during 2010 and 2011.

With highway construction up 10 percent in 2013, highway and bridge construction together registered a 21 percent gain for the full year. The top five states for highway and bridge construction in 2013, ranked by the dollar volume of activity, were Texas, New York, California, New Jersey and Virginia.

“The construction industry in 2013 made progress towards establishing a more broad-based recovery, after several years in which the upturn was more limited in scope,” stated Robert A. Murray, chief economist for McGraw Hill Construction. “Housing continued to lead the way, strengthening throughout much of 2013, and it was joined by a faster pace for commercial building, albeit from low levels. The institutional building sector registered a considerably smaller decline than in prior years, as its lengthy downturn appears to be ending. The public works sector in 2013 showed surprising strength, helped by the start of several major projects even amidst restrained government spending. Running counter in 2013 was a steep drop for new electric utility starts, after the robust amount reported in 2012. For 2014, the prospects look good for total construction, with growth anticipated for housing and commercial building, while the institutional building sector at least stabilizes.”

For 2013 as a whole, nonresidential building increased 7 percent to $168.6 billion, shifting to an upward direction after the 5 percent decline reported for 2012. The commercial categories overall advanced 16 percent, faster than the 13 percent gain witnessed in 2012. The strongest gain by commercial category was registered by hotels, up 28 percent; followed by warehouses, up 27 percent; office buildings, up 17 percent; and stores, up 1 percent.

The 2013 amount for residential building was $205.5 billion, up 24 percent, and close to the 31 percent gain reported for 2012. Single family housing in dollar terms climbed 26 percent, similar to the prior year’s 29 percent hike.

The regional pattern for single family housing in 2013 showed increases for all five major regions, as follows – the South Atlantic, up 33 percent; the Midwest, up 27 percent; the West and Northeast, each up 26 percent; and the South Central, up 18 percent. Multifamily housing in 2013 advanced 16 percent, showing additional growth on top of the increases in 2010 (up 23 percent), 2011 (up 33 percent), and 2012 (up 37 percent).

For the full year 2013, nonbuilding construction dropped 12 percent to $142.7 billion. After achieving a record high in current dollar terms in 2012, new electric utility starts plunged 57 percent in 2013. In contrast, the public works portion of nonbuilding construction increased 9 percent in 2013, a resilient performance given concerns that tight government budgets would dampen activity. Of the public works project types, bridge construction showed the largest percentage gain, climbing 55 percent.