Construction Starts Rose 7 Percent in 2014

For 2014 as a whole, total construction starts climbed 7 percent to $575.3 billion, according to Dodge Data & Analytics. This continues the pattern of moderate expansion for total construction starts reported during the previous two years – 2012, up 10 percent; and 2013, up 9 percent.

“The continued expansion for construction starts in 2014 carried several notable features,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The nonresidential building sector showed more growth for commercial building, the first increase for institutional building after five years of decline, and a surge of manufacturing plant projects. Residential building was supported by the strengthening multifamily market, but was not able to offer the same upward push as in 2012 and 2013 given the flat performance by single-family housing. Nonbuilding construction showed a slower pace for public works, and while electric utilities lost further momentum the decline was much less severe than in 2013.

“Looking ahead to 2015, nonresidential building should benefit from more private investment directed at commercial building and more financing for school construction given the passage of recent bond measures,” Murray continued. “However, the rate of increase for nonresidential building will be dampened by a slower pace for energy-related manufacturing projects. Residential building should see more multifamily housing while renewed growth for single family housing will need the banking industry to provide potential homebuyers with greater access to home mortgages. Nonbuilding construction will be helped by the fact that federal spending levels for fiscal 2015 were set in December, but Congress needs to address the stopgap federal transportation legislation that expires at the end of May.”

For 2014 as a whole, nonresidential building climbed 17 percent to $208.2 billion, following the 11 percent gain that was reported in 2013.

The manufacturing building category surged 74 percent, lifted by the start of numerous energy-related plants located in the Gulf Coast region of Texas and Louisiana, such as the $3.0 billion Chevron Phillips cracker ethylene plant and the $3.0 billion Exxon petrochemical plant expansion.

If the manufacturing plant category is excluded, nonresidential building in 2014 would be up 11 percent, after an 8 percent increase in 2013 on a similar basis.

The commercial building group in 2014 advanced 15 percent, led by a 28 percent increase for the office category that featured the start of such projects as the $2.3 billion office portion of the $2.5 billion Apple corporate headquarters in Cupertino, Calif., and the $806 million office portion of the $933 million Comcast Innovation and Technology Center in Philadelphia.

The top five metropolitan areas ranked by the dollar volume of new office starts in 2014 were – New York, San Jose, Houston, Philadelphia and Chicago.

The other commercial categories showed this performance in 2014 – hotels, up 23 percent; warehouses, up 18 percent; and stores and shopping centers, unchanged from the previous year.

The institutional building group for all of 2014 increased 8 percent, marking the first gain since 2008. The educational facilities category rose 12 percent, and featured greater activity for these major segments – K-12 school construction, up 18 percent; and college and university construction, up 19 percent. Increases were also reported for public buildings, up 13 percent; amusement-related work, up 12 percent; and transportation terminals, up 10 percent.

The healthcare facilities category in 2014 did not participate in the broad upward trend, as it slipped 1 percent. Church construction in 2014 continued to be depressed, falling an additional 10 percent.

The 2014 amount for residential building was $227.8 billion, up 8 percent, and a much smaller increase than what was reported in 2012, up 31 percent; and 2013, up 26 percent.

Single-family housing grew just 2 percent in dollar terms, considerably less than its 27 percent jump in the previous year. The regional pattern for single family housing in 2014 was mixed.

Gains were reported in the South Central, up 7 percent; the South Atlantic, up 3 percent; and the Northeast, up 2 percent; while declines were reported in the West, down 1 percent; and the Midwest, down 2 percent.

Multifamily housing in 2014 climbed 28 percent, and has now shown annual dollar gains in excess of 20 percent for five straight years.

By major region, multifamily housing revealed this performance in 2014 – the Northeast, up 41 percent; the South Atlantic, up 30 percent; the South Central, up 23 percent; the Midwest, up 20 percent; and the West, up 17 percent.

The top five metropolitan areas in terms of the 2014 dollar amount of multifamily starts were – New York, Miami, Washington, D.C., Los Angeles and Boston.

Metropolitan areas ranked 6 through 10 were – Chicago, Seattle, San Francisco, Philadelphia and Dallas-Ft. Worth.

For the full year 2014, nonbuilding construction dropped 6 percent to $139.2 billion, which followed the 9 percent decline reported for 2013.

Public works construction overall in 2014 was down 7 percent, sliding back after its 12 percent gain in the previous year. Highway and bridge construction retreated 15 percent from a very strong amount in 2013 that included several substantial bridge projects, such as the $3.1 billion Tappan Zee Bridge replacement in New York. Declines were also reported for river/harbor development, down 6 percent; and water supply systems, down 7 percent.

Annual gains were reported for miscellaneous public works, up 4 percent (with much of the support coming from increased mass transit work), and sewer construction, up 8 percent. The electric utility and gas plant category in 2014 retreated 2 percent, a much smaller drop than the 55 percent plunge in 2013. While alternative power generation projects (primarily solar and wind) were down sharply, more traditional power generation plants held steady, and natural gas plants increased with the start of the Dominion Cove Point LNG Liquefaction project.

The 7 percent gain for total construction starts at the national level in 2014 was the result of greater activity in all five major regions. Leading the way was the South Central, up 14 percent, followed by the South Atlantic, up 11 percent; the West, up 7 percent; the Northeast, up 2 percent; and the Midwest, up 1 percent.

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