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New Construction Starts in February Recede 3 Percent


Highway and Bridge Construction Grew 11 Percent But Nonbuilding Construction Fell 23 Percent.

At a seasonally adjusted annual rate of $708.1 billion, new construction starts in February slipped 3 percent from the previous month, according to Dodge Data & Analytics. The reduced activity in February followed a 2 percent decline in January, as the early months of 2018 are showing some loss of momentum after the 12 percent increase reported back in December.

Highway and bridge construction grew 11 percent in February. However the nonbuilding construction sector, comprised of public works and electric utilities/gas plants, fell 23 percent in February, resulting in the decline for total construction starts for the second month in a row. In contrast, nonresidential building grew 5 percent in February, continuing the strengthening trend, which resumed in December, and residential building improved a slight 1 percent.

“The 152 average for the Dodge Index during the first two months of 2018 is the same as the 152 average reported for the fourth quarter of 2017, as the pace of construction starts viewed over several months seems to have leveled off,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “What’s important to keep in mind is that the moderately subdued amount for total construction starts during the first two months of 2018 reflects diminished activity by public works and electric utilities, which given their inherent volatility are likely to bounce back over the next month or two. Compared to last year’s fourth quarter, the first two months of 2018 have seen further increases for nonresidential building, helped by its institutional building segment, and residential building, helped by multifamily housing. This suggests that the construction expansion, while slowing, is still in progress.

“It’s true that the construction industry is now seeing more headwinds,” Murray continued. “Material prices have risen over the past year, and the tariffs on steel and aluminum announced by the Trump Administration will lead to further price hikes. The Federal Reserve is tightening monetary policy, and concerns about inflation have contributed to rising long-term interest rates. The prospects of an infrastructure program getting passed by Congress this year remain uncertain, against the backdrop of a mounting federal budget deficit. At the same time, the economy is expected to get a near term lift from tax reform, which would benefit commercial and manufacturing building, while funding from recent bond measures will support such institutional project types as school construction. On balance, the rate of growth for total construction is decelerating, but activity for 2018 is expected to stay at a relatively healthy amount.”

Nonbuilding Construction

Nonbuilding construction in February was $118.2 billion (annual rate), down 23 percent from January. The electric utility/gas plant category was particularly weak, plunging 83 percent as the largest project entered as a February start was a $40 million electric substation upgrade in California.

In January, the largest electric utility project entered as a construction start was an $872 million natural gas-fired power plant in Louisiana. The public works categories as a group dropped 17 percent in February, including a 54 percent plunge for miscellaneous public works. In January, the miscellaneous public works category had climbed 22 percent, reflecting the start of the $2.0 billion NEXUS natural gas pipeline in Ohio and Michigan.

In February the largest miscellaneous public works project entered as a construction start was a $225 million light rail project in Bellevue, Wash. The river/harbor development category also experienced a steep decline in February, sliding 36 percent.

On the plus side, highway and bridge construction grew 11 percent in February, climbing back to within 2 percent of last year’s average monthly pace. Large highway and bridge projects entered as February construction starts were the $545 million Gateway Expressway project in the Tampa area, the $441 million replacement of the Frederick Douglass Memorial Bridge and Suitland Parkway project in Washington, D.C., and a $225 million roadway and bridge improvement project in Norristown, Pa. Sewer construction and water supply construction both rebounded in February, climbing 36 percent and 10 percent, respectively.

Nonresidential Building

Nonresidential building in February was $246.7 billion (annual rate), up 5 percent from January. The commercial categories as a group rose 14 percent, with gains across most of the structure types. Office construction advanced 24 percent after a subdued January, boosted by the start of two large data centers – a $600 million Google data center in Clarksville, Tenn., and a $183 million Facebook data center in Ft. Worth, Texas.

Other large office projects that reached groundbreaking in February were the $220 million Cerner Corporation Campus in Kansas City, Mo., the $200 million Turkish consulate office building in New York and the $140 million Stafford Place renovation project in Arlington, Va.

Hotel construction jumped 60 percent in February, featuring the start of three noteworthy projects – the $250 million Loew’s Kansas City Convention Hotel in Kansas City, Mo., the $225 million Grand Hyatt Airport Hotel at San Francisco International Airport, and the $180 million Margaritaville Hotel in New York.

Commercial garages climbed 42 percent in February, with the lift coming from a $130 million parking expansion at Midway International Airport in Chicago. Store construction grew 6 percent in February, helped by the start of the $271 million expansion of the Bal Harbour Shops in Bal Harbour, Fla.

Warehouse construction in February was the one commercial structure type to decline, sliding 36 percent, although the latest month did include a $100 million Big Lots distribution center in Apple Valley, Calif.

The institutional categories as a group increased 5 percent in February, boosted by a 52 percent surge for new healthcare facilities.

There were six healthcare facilities valued each at $100 million or more entered as February starts, led by the $400 million Boston Children’s Clinical Building in Boston, the $320 million Prince George’s County Regional Hospital in Upper Marlboro, Md., and the $180 million expansion to the University of Mississippi Medical Center Children’s Hospital in Jackson, Miss.

Educational facilities increased 10 percent in February, aided by large high school construction projects in Townsend, Del. ($149 million), Herndon, Va. ($84 million), and Nashville ($83 million), plus groundbreaking for a $145 million science facility at Towson University in Towson, Md.

Residential Building 

Residential building in February was $343.3 billion (annual rate), up 1 percent from January. Multifamily housing increased 7 percent, reflecting the start of 11 projects valued each at $100 million or more. Leading the way was the $700 million City View Tower at Court Square in Queens, N.Y., followed by a $300 million high-rise condominium building in Miami and a $215 million high-rise condominium in New York.

Single-family housing in February slipped 1 percent, easing back for the second month in a row following the modest increases witnessed during the second half of 2017. In February, single family housing by major region showed gains in the Northeast, up 12 percent; and the Midwest, up 8 percent; but declines in the South Atlantic, down 2 percent; the South Central, down 4 percent; and the West, down 5 percent.

 Monthly Construction Starts (Seasonally Adjusted Annual Rates, In Millions of Dollars) February 2018

January 2018

% Change
Nonresidential Building $246,663 $236,037 +5
Residential Building $343,281 $338,678 +1
Nonbuilding Construction $118,205 $153,949 -23
TOTAL Construction $708,149 $728,664 -3
Source: U.S. Dept. of Commerce