January Construction Starts Rise; Year Starts Strong

The value of new construction starts in January grew 2 percent to a seasonally adjusted annual rate of $607.9 billion, according to Dodge Data & Analytics.

The gain for total construction relative to December reflected moderate growth for housing. At the same time, nonresidential building retreated slightly in January, as increases for commercial building and manufacturing plant construction were offset by diminished activity for institutional building.

The nonbuilding construction sector also retreated slightly in January, as modest improvement for public works was paced by a huge jump for highway and bridge work.

“The construction industry, as shown by the construction start statistics, seems to be gradually regaining upward momentum,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “Last year construction activity proceeded at a healthy clip during the first half, followed by a 20 percent drop in the third quarter, and then a slight 1 percent rebound in the fourth quarter. January’s modest gain for construction starts is consistent with what was shown at the end of last year. On the plus side, long-term interest rates remain low in early 2016, and such market fundamentals as occupancies and rents are supportive of further growth by multifamily housing and commercial building. The new five-year federal transportation act is in place and fiscal 2016 appropriations have been passed, which should help public works construction. On the negative side, the struggling global economy, the extended drop in energy prices, and the sliding stock market in early 2016 have raised the degree of uncertainty in the economic environment, which may contribute to a more restrained approach towards investment in the near term.”

Residential Building

Residential building in January advanced 5 percent to $294.0 billion (annual rate), helped by a 6 percent gain for single family housing. Murray noted, “January’s improved pace for single family housing may be the initial sign that it’s moving beyond the lengthy plateau that took hold during the second half of 2015. Admittedly, though, the winter readings on housing can be volatile and more monthly gains are needed before it’s possible to say that growth for single family housing is being re-established.”

Multifamily housing in January increased 2 percent, showing further strengthening on top of the 22 percent jump that was reported in December. There were nine multifamily projects valued at $100 million or more that reached groundbreaking in January, with six of the nine located in the New York metropolitan area, led by two projects in Manhattan – the $256 million multifamily portion of a $265 million mixed-use high-rise and a $243 million apartment tower.

Large multifamily projects above $100 million outside of the New York metropolitan area that reached groundbreaking in January were located in Chicago ($237 million), Seattle ($131 million) and San Francisco ($104 million).

Nonresidential Building

Nonresidential building, at $180.3 billion (annual rate), slipped 1 percent in January. The institutional categories as a group fell 10 percent, pulling back from the improved volume reported in December. Healthcare facilities dropped 20 percent, as occasional gains such as the 11 percent hike reported in December for this project type continue to be followed by retreat.

The largest healthcare facility projects reported as January starts were an $84 million hospital tower in Neptune, N.J., and a $65 million outpatient cancer center in Baltimore. The smaller institutional categories registered weaker activity in January – public buildings, down 5 percent; transportation terminals and religious buildings, each down 35 percent; and amusement-related work, down 49 percent.

The amusement-related category in December had been boosted by such projects as the $478 million renovation and expansion of the Miami Beach Convention Center in Miami Beach, Fla., and the $130 million renovation of the Nassau Coliseum in Uniondale, N.Y. In January the largest amusement-related project was an $84 million addition to the Charleston Civic Center in Charleston, W.Va.

In contrast to the generally weaker activity reported for the institutional building group, the educational facilities category was able to climb 17 percent in January. The largest educational facilities project entered as a January start was a $108 million bioscience research laboratory at the University of Arizona in Tucson, Ariz. The latest month also included groundbreaking for three large high schools, located in Batavia, Ohio ($99 million); Valdosta, Ga. ($85 million); and Houston ($76 million).

The commercial building categories as a group grew 3 percent in January, following the 12 percent increase reported in December. Office construction led the way with a 29 percent gain, helped by groundbreaking for these projects – the $242 million Park Tower at Transbay in San Francisco, a $141 million office building in Boston, and a $91 million office building in Baltimore.

Warehouse construction in January increased 17 percent, lifted by the start of a $134 million logistics center in Carlisle, Pa. Hotel construction in January grew 14 percent, with the upward push coming from the $205 million conversion of an office building to a hotel in the Times Square district of New York, N.Y. Both stores and garages/service stations fell back in January after December gains, retreating 10 percent and 35 percent respectively.

The manufacturing plant category in January jumped 59 percent, running counter to its generally declining activity witnessed throughout much of 2015. Large manufacturing plant projects that were entered as January starts included a $750 million methanol plant in Louisiana and a $125 million pipe manufacturing plant in Nebraska.

Nonbuilding Construction

Nonbuilding construction in January dropped 2 percent to $133.7 billion (annual rate). The electric utility and gas plant category fell 18 percent, maintaining the broad downward trend that emerged during the second half of 2015 after a strong first half.

Even with the decline, there were still several noteworthy power plant projects that reached the construction start stage in January, including a $900 million natural gas-fired power plant in Pennsylvania, a $303 million wind power facility in Michigan and a $205 million solar power facility in Florida.

The public works categories as a group edged up 1 percent in January, helped in particular by a 19 percent jump for highway and bridge construction. Large highway and bridge projects that were entered as January starts included the $655 million I-77 Toll Lanes project in the Charlotte, N.C., area and a $100 million highway widening project in the Houston area.

In addition, sewer and hazardous waste construction in January surged 68 percent, reflecting the start of a $300 million environmental dredging project in the Chicago area. The other public works categories experienced reduced activity relative to December, with water supply construction down 19 percent, river/harbor development down 30 percent, and miscellaneous public works (site work, mass transit, pipelines, etc.) down 32 percent.


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