Construction Starts Ease Back 2 Percent in September

Nonresidential Building Tops Strong August Amount,
But Housing and Public Works Retreat.

The value of new construction starts in September decreased a slight 2 percent to a seasonally adjusted annual rate of $703.7 billion, according to Dodge Data & Analytics. This follows the 22 percent jump for total construction starts in August, which witnessed the highest monthly pace for construction starts so far in 2016.

Highway and bridge construction in September climbed 17 percent.

Nonresidential building showed further strength in September, exceeding its elevated August amount. The lift for nonresidential building in September came from the start of two very large office towers in New York with a combined construction start cost of $3.5 billion, as well as eight large hospital projects with a combined start cost of $2.2 billion.

However, the housing sector lost momentum in September, pulling back from August, which included groundbreaking for a number of very large multifamily projects. Nonbuilding construction also slipped in September, following its improved August volume that included the start of a $3.0 billion pipeline upgrade in the southeastern part of the nation.

Nonresidential Building

Nonresidential building in September increased 5 percent to $282.3 billion (annual rate), following the 43 percent surge in August which benefitted from the start of a $3.0 billion petrochemical plant in Louisiana and the $1.7 billion Wynn Casino in Everett, Mass. The nonresidential increase in September was led by a 148 percent jump for office construction, which reflected the start of two massive office towers in New York City – the $2.0 billion, 66-story 3 Hudson Yards Boulevard office building on Manhattan’s West Side and the $1.5 billion, 67-story One Vanderbilt Tower near Grand Central Station.

September also featured the start of seven additional office buildings each with a construction start cost of $100 million or more, including the $280 million design center at the Ford Motor Co.’s Dearborn, Mich., office campus; the $209 million Four Constitution Square office complex in Washington, D.C.; and the $178 million Oracle Corporation office campus in Austin, Texas.

Store construction also strengthened in September, rising 31 percent and helped by the start of a $150 million mall expansion in Staten Island, N.Y. On the negative side, hotel construction in September retreated 30 percent after its substantial August gain, although September did see groundbreaking for the $123 million Ritz Carlton Hotel in Paradise Valley, Ariz.

Commercial garages and warehouses experienced respective declines of 20 percent and 17 percent in September. As a group, the commercial categories registered a 37 percent increase, after the 31 percent gain reported in August. The improved levels for commercial building in August and September followed a lackluster amount of construction starts during the previous four months. The manufacturing plant category in September dropped 84 percent, after being boosted in August by the $3.0 billion petrochemical plant in Louisiana.

The institutional side of the nonresidential building market advanced 8 percent in September. Much of the lift came from a strong volume for healthcare facilities, which climbed 57 percent. There were eight healthcare facilities valued each at $100 million or more that reached groundbreaking in September, with the two largest being a $756 million healthcare facility complex in Loma Linda, Calif., and the $500 million Vassar Brothers Medical Center patient pavilion in Poughkeepsie, N.Y.

New education facility projects grew 4 percent in September, helped by three large college/university buildings – a $175 million science center at Amherst College in Amherst, Mass.; a $120 million engineering and sciences facility at Texas State University in San Marcos, Texas; and a $115 million biomedical sciences and engineering facility at the University of Maryland in Rockville, Md.

For the smaller institutional categories, gains were reported in September for public buildings, up 10 percent; and religious buildings, up 40 percent from August. Amusement construction starts were down 32 percent, which included $975 million for the casino portion of the Wynn Casino, although September did see groundbreaking for the $486 million Milwaukee Bucks basketball arena in Milwaukee. Transportation terminal work in September was down 8 percent, although the latest month did include the $442 million Terminal 1 Center renovation at San Francisco International Airport.

Residential Building

Residential building, at $271.1 billion (annual rate), fell 8 percent in September. Multifamily housing retreated after a strong performance in August, falling 17 percent. While August included 13 multifamily projects valued each at $100 million or more, there were only five such projects in September, including a $225 million multifamily building in Seattle and a $145 million multifamily building in Milwaukee.

Single-family housing in September dropped 4 percent, slipping back slightly from the plateau that’s been present for much of 2016. By geography, single family housing in September showed weaker activity in the South Atlantic, down 9 percent; the South Central and West, each down 2 percent; the Midwest, down 1 percent; while the Northeast was unchanged from August.

Nonbuilding Construction

Nonbuilding construction in September dropped 2 percent to $150.3 billion (annual rate). Pulling the total down was a 72 percent plunge for the “miscellaneous public works” category, which includes such diverse project types as pipelines, mass transit, and site work.

The largest miscellaneous public works project reported as a September start was a $244 million landfill project in Staten Island, N.Y. The environmental public works categories in September were mixed, with sewers, down 23 percent; but river/harbor development, up 16 percent; and water supply systems, up 20 percent.

Highway and bridge construction in September climbed 17 percent, aided by the start of a $916 million segment of the Loop 202 (South Mountain Freeway) project in the Phoenix area, and the $221 million Port Access Road in the Charleston, S.C., area.

New electric utility starts jumped 219 percent in September from a subdued August. Large electric utility projects that contributed to September’s increase were a $1.3 billion natural gas-fired power plant in Virginia, a $600 million power plant coal burner replacement in Minnesota, and a $417 million wind farm in Illinois.

 Monthly Construction Starts (Seasonally Adjusted Annual Rates, In Millions of Dollars) Sept 2016

Aug 2016

% Change
Nonresidential Building $282,270 $268470 +5
Residential Building $271,120 $295,185 -8
Nonbuilding Construction $150,339 $152,668 -2
TOTAL Construction $703,729 $716,323 -2

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