Construction Starts Post Solid Gain in August

Large Projects Fuel Gains Across Most Broad Sectors; Highway And Bridge Starts Move Up 13%.

Total construction starts rose 19% in August to a seasonally adjusted annual rate of $793.3 billion. Gains were seen in all three major building sectors: nonresidential building starts rose 16% and residential building climbed 12%, while nonbuilding construction jumped 40% over the month. While large projects certainly influenced the August gains, removing those projects would still have resulted in a gain for the month.

“Construction starts continue to make up ground following the nadir in activity in April,” stated Richard Branch, chief economist for Dodge Data & Analytics. “Residential and commercial construction are driving the gains, while the public side of building construction is proving to be a drag on growth. The regional pattern has also evened out with gains in starts seen in every region but the Midwest in August – somewhat muting the concern over the potential impact of rising COVID cases in the South and West. The nascent recovery in starts, however, will face challenges as summer turns to fall. The expiration of enhanced unemployment insurance benefits and small business loans that were provided in the CARES Act, the budget crises facing state and local governments, and the impending expiration of the FAST Act on Sept. 30 will all have a dampening effect on starts.”

Nonbuilding Construction
Nonbuilding construction posted a 40% gain in August to a seasonally adjusted annual rate of $184.4 billion nearly reversing the sizable decline in the previous month as two large projects pushed activity higher. Starts in the utility/gas plant more than doubled, while environmental public works posted an 89% gain and highway and bridge starts moved up 13%. Through the first eight months of the year, starts in the highway and bridge category were up 1%.

The largest nonbuilding project to break ground in August was the $1.3 billion Wastewater Control Plant in San Francisco. Also starting during the month were the $888 million Dania Beach Clean Energy Center in Dania Beach, Fla., and the $310 million new Aztec Stadium at San Diego State University in San Diego.

Nonresidential Building
Nonresidential building starts in August were also aided by large projects in the office and manufacturing sectors leading to an increase of 16% to $236.7 million. Removing these projects, however, would not have prevented an increase in nonresidential building starts. Commercial starts rose 36% and manufacturing starts soared 201%. Institutional starts, however, fell 7% despite small gains in education and healthcare.

The largest nonresidential building project started in August was the $1.0 billion Facebook Data Center (Project Woolhawk) in Gallatin, Tenn. Also starting during the month was the $740 million Texas Instruments Fabrication Plant in Richardson, Texas, and a $700 million mixed-use office and hotel project in Boston.

Residential Building
Residential building starts moved 12% higher over the month in August to a seasonally adjusted annual rate of $372.1 billion. Multifamily building starts increased 62%, while single family starts fell 3%.

The largest multifamily structure to break ground in August was the $549 million Mana’olana Place Mixed Use in Honolulu. Also starting in August were the $500 million Pacific Park Mixed Use Development in Brooklyn, and a $250 million condominium at the Union Theological Seminary Space in New York.

Year-to-date through the first eight months of the year, starts were 14% lower than in the same period in 2019. Nonresidential starts were 24% lower and nonbuilding starts were down 20%, but residential starts were down less than 1%. For the 12 months ending August 2020, total construction starts declined 6% from the 12 months ending August 2019. Nonresidential building starts fell 13% and nonbuilding starts were 9% lower in the 12 months ending August 2020, while residential building starts rose 3%.

Source: U.S. Dept. of Commerce

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