November Construction Dips; Up Year-Over-Year

At a seasonally adjusted annual rate of $563.3 billion, new construction starts in November fell 5 percent from the previous month, according to Dodge Data & Analytics. The decline represented a partial pullback after the 13 percent increase reported for total construction in October, as nonresidential building lost some momentum following its improved October pace.

During the first 11 months of 2015, total construction starts on an unadjusted basis were $597.9 billion, up 8 percent from the same period a year ago.

Decreased activity was also reported for housing in November, while the nonbuilding construction sector (public works and electric utilities/gas plants) held steady. Highway and bridge construction in November climbed 16 percent

“The pattern of construction starts on a month-to-month basis is rarely smooth, and on balance October and November do show improvement after the subdued activity in late summer,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The construction expansion, while often hesitant, should be able to continue in coming months as the result of several factors. Market fundamentals for commercial real estate, namely occupancies and rents, continue to strengthen. More construction bond measures are getting passed at the state and local levels of government, particularly for school construction. A new five-year federal transportation bill was enacted in early December, and it’s estimated that federal financing support for highway and bridge construction will be up 5 percent next year. Congress has reached agreement on fiscal 2016 appropriations, alleviating near term uncertainty with regard to federal funding. And, while the Federal Reserve has begun to move monetary policy towards a more neutral stance, the increases in short term interest rates during 2016 are expected to be very gradual.”

Nonresidential building in November dropped 13 percent to $175.4 billion (annual rate), following its 33 percent rebound in October. The commercial building categories as a group have been the cause of much of the volatility over the past two months, sliding 29 percent in November after soaring 53 percent in October. Office construction plunged 43 percent in November after being lifted in October by the start of two very large data centers, valued at $570 million and $300 million respectively, and several large office buildings.

The major office projects that were reported as November starts were generally smaller in scale than what took place in October, and included such projects as a $155 million insurance claims service center in Plano, Texas, and a $70 million corporate headquarters in Rapid City, S.D. The garage and service station category in November decreased 39 percent after soaring 119 percent in October with the start of two large consolidated rental car facilities at Chicago’s O’Hare International Airport and the San Antonio International Airport.

Store construction in November fell 30 percent, although it did include groundbreaking for a $100 million outlet mall in Daytona Beach, Fla., and warehouse construction retreated 13 percent. Hotel construction in November stayed even with its October pace, helped by the start of the $193 million hotel portion of the $400 million Eighth and Howell convention center hotel complex in Seattle.

The manufacturing plant category in November was able to show improvement following its depressed October activity, rising 38 percent with the upward push coming from two automotive-related projects – a $307 million expansion to a General Motors plant in Arlington, Texas, and a $250 million expansion to a Mercedes-Benz plant in Vance, Ala.

The institutional building group in November receded a slight 1 percent after registering 23 percent growth in October. Weaker activity was reported for amusement-related work, down 12 percent, although some support was provided by the $181 million convention center portion of the Eighth and Howell convention center hotel complex in Seattle.

November declines were also reported for transportation terminals, down 19 percent; and religious buildings, down 4 percent. The educational building category in November rose 3 percent, showing further growth on top of the 21 percent increase reported in October.

Large educational facility projects that reached groundbreaking in November included the $288 million health education campus at the Cleveland Clinic in Cleveland, a $206 million public health laboratory at the Aberdeen Proving Grounds in Maryland, and a $79 million elementary school modernization in Washington, D.C.

Healthcare facilities in November edged up 1 percent, aided by the start of a $109 million hospital in the Orlando, Fla., area. The public buildings category improved 42 percent in November, with the lift coming from a $45 million facility maintenance and repair project at McConnell Air Force Base in Kansas and a $43 million police headquarters in Orlando Fla.

Residential building in November decreased 2 percent to $257.4 billion (annual rate). Multifamily housing retreated 6 percent after soaring 43 percent in October. There were six multifamily projects valued at $100 million or more that reached groundbreaking in November, fewer than the 11 such projects that were reported as construction starts in October, but still a healthy amount.

Of these six large projects, three were located in New York (valued respectively at $218 million, $193 million, and $170 million), while the remaining 3 were located in Reston, Va. ($187 million), Bonita Springs, Fla. ($146 million), and Stamford, Conn. ($122 million).

Single family housing in November was unchanged from its October pace, and for the past seven months has essentially plateaued after showing steady improvement earlier in 2015. The November pace for single-family housing remained 14 percent higher than the average monthly amount reported during 2014.

Nonbuilding construction in November was reported at $130.5 billion (annual rate), essentially unchanged from its October amount. The public works categories as a group increased 17 percent in November, advancing for the second month in a row after three months of decline.

The miscellaneous public works category, which includes such diverse project types as site work, mass transit and pipelines, surged 93 percent in November with the boost coming from the $1.6 billion Westside Subway Extension project in Los Angeles.

Highway and bridge construction in November climbed 16 percent, and included such projects as a $315 million highway reconstruction in Milwaukee, the $168 million replacement of the southbound deck on the Pulaski Skyway in the Newark, N.J., area, and a $164 million bridge in Union City, Pa.

The environmental public works categories were mixed in November, with a 15 percent increase for river/harbor development but considerable declines for water supply construction, down 31 percent; and sewer construction, down 42 percent. In contrast to the latest month’s increase for overall public works, the electric power and gas plant category plummeted 59 percent in November. Even with this decline, the electric power and gas plant category did include two noteworthy projects as November starts – a $500 million natural gas-fired power plant in Ohio and a $169 million transmission line project in Illinois.

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