December Construction Starts Improve 5 Percent

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 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.

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 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).

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