The value of new construction starts in September soared 14 percent from the previous month to a seasonally adjusted annual rate of $814.8 billion, according to Dodge Data & Analytics. The nonresidential building sector strengthened for the second month in a row, climbing 37 percent with the boost coming from the start of a $6 billion ethane cracker plant in western Pennsylvania plus two projects in New York City – the $4 billion Delta Airlines terminal facility at LaGuardia Airport and the $1.7 billion 50 Hudson Yards office tower in Manhattan. Residential building in September edged up 1 percent, as both single family and multifamily housing registered modest gains. Running counter in September was a 3 percent drop for nonbuilding construction, with decreased activity for its public works segment. Through the first nine months of 2017, total construction starts on an unadjusted basis were $557.7 billion, essentially matching the corresponding amount from a year ago. The year-to-date dollar volume for total construction was dampened by a 38 percent decline for the electric utility/gas plant category. If the electric utility/gas plant category is excluded, total construction starts during the first nine months of 2017 would be up 3 percent compared to the same period last year.
September data produced a reading of 172 for the Dodge Index (2000=100), up from 151 in August. “The pattern of construction starts on a monthly basis has occasionally been subject to spikes, due to the presence of large projects in a given month, and September qualifies as one of those monthly spikes,” states Robert A. Murray, chief economist for Dodge Data & Analytics. “Looking at the data on a quarterly basis helps to ease the volatility present in the monthly statistics, and it shows the third quarter rebounding 8 percent after a 9 percent decline in the second quarter, returning the level of activity to within 2 percent of the pace achieved during the first three months of this year. As the current expansion for construction has matured, there’s been more of an up-and-down pattern on a quarterly basis, including what’s been reported so far during 2017. What does stand out about the construction industry in 2017 is the strength shown by nonresidential building, led by such institutional project types as transportation terminals and educational facilities. On the commercial side, office buildings and warehouses continue to see growth, although hotel construction appears to have peaked and store construction has generally weakened. And, with this year’s pickup in petrochemical plant starts, following a steep two-year decline, the manufacturing building category is no longer exerting a downward pull on the nonresidential building total.”
Nonresidential building in September was $368.8 billion (annual rate), a 37 percent gain compared to its August amount. The manufacturing building category surged 490 percent from subdued activity in August, boosted by the $6 billion ethane cracker facility in Monaca, Pa., in close proximity to the Marcellus shale gas field. The next largest manufacturing project entered as a September start was a $280 million poultry processing plant in Fremont, Neb. The institutional building categories as a group climbed 25 percent in September, led by a 145 percent hike for transportation terminal work. The $4 billion new terminal facility for Delta Airlines at New York City LaGuardia Airport, which will replace Delta’s C and D Terminals, joins the $3.4 billion Central Terminal Building project at LaGuardia Airport that was entered as a January 2017 start. Through the first nine months of 2017, airline terminal construction starts have totaled $14 billion, almost five times what was reported during the same period of 2016. Educational facilities, the largest nonresidential building category by dollar amount, increased 14 percent in September. There were ten educational facility projects valued at $100 million or more that reached groundbreaking in September, including a $243 million neuroscience building at the University of California San Francisco, the $200 million renovation of the Mid-Manhattan Library in New York City, and a $150 million high school in Germantown, Md. Healthcare facilities in September retreated 2 percent, although the latest month did include a $550 million medical center in St. Louis, a $183 million hospital in Frisco, Texas, and a $176 million medical center expansion in Vail, Colo. The smaller institutional project types showed a mixed performance in September. The public buildings category climbed 42 percent with the help of a $113 million criminal justice center complex in Nashville and a $91 million U.S. Land Port of Entry facility at Alexandria Bay, N.Y. Declines were reported in September for religious buildings, down 5 percent; and amusement-related projects, down 59 percent. The reduced amount for amusement-related work was relative to an elevated August that included the start of the $1.2 billion expansion of the Javits Convention Center in New York City. Even with the decline, the amusement-related category in September did include several noteworthy projects, such as the $140 million expansion to the Quicken Loans Arena in Cleveland.
The commercial building categories as a group settled back 4 percent in September, following a 12 percent gain in August. Hotel construction dropped 45 percent from August which featured the start of several large projects, including the $342 million hotel portion of the $500 million Resorts World Hotel and Casino in Las Vegas, although September did include groundbreaking for the $95 million Four Seasons Napa Resort in Calistoga, Calif. Warehouse construction also weakened in September, sliding 14 percent. On the plus side, office construction advanced 23 percent in September, led by the $1.7 billion 50 Hudson Yards office tower that’s part of the Hudson Yards development in New York City. Also reaching the construction start stage in September was a $300 million office campus in Burlingame, Calif. and an $80 million office building in Culver City, Calif. In addition, gains were reported in September for store construction, up 12 percent; and commercial garages, up 2 percent.
Residential building improved a slight 1 percent in September to $298.9 billion (annual rate), with modest increases for single family housing, up 1 percent; and multifamily housing, up 2 percent. Single family housing appeared to lose momentum in late spring, but now seems to be stabilizing with gains in August and September. By geography, single family housing showed growth in four of the five major regions in September – the Midwest, up 5 percent; the Northeast, up 4 percent; the West and South Central, each up 2 percent. The South Atlantic was the one major region to register a September decline, sliding 4 percent. Multifamily housing has shown an up-and-down pattern so far during 2017, as its 2 percent increase in September followed an 8 percent drop in August. There were seven multifamily projects valued at $100 million or more that reached groundbreaking in September, led by the $235 million multifamily portion of a $290 million mixed-use building in New York City, a $200 million multifamily high-rise in San Diego, and a $189 million multifamily high-rise in Jersey City, N.J. In September, the top five metropolitan markets ranked by the dollar volume of multifamily starts were – New York City, Dallas-Ft. Worth, Texas, Philadelphia, Seattle, and Boston. During the first nine months of 2017, the top five metropolitan markets ranked by the dollar amount of multifamily starts, with their percent change from a year ago, were – New York City, down 7 percent; Los Angeles, down 13 percent; Chicago, down 27 percent; San Francisco, up 1 percent; and Washington DC, down 12 percent. Metropolitan areas ranked 6 through 10 for multifamily housing in the first nine months of 2017 were – Atlanta, up 37 percent; Boston, down 25 percent; Miami, down 46 percent; Seattle, down 27 percent; and Philadelphia, up 65 percent.
Nonbuilding construction in September was $147.1 billion (annual rate), down 3 percent from August. The public works categories as a group fell 6 percent, retreating for the second month in a row. Highway and bridge construction descended 6 percent, although September did include the start of several noteworthy bridge projects, including $452 million for renovation work on the George Washington Bridge in New York City. During the first nine months of 2017, the top five states in terms of the dollar amount of highway and bridge construction starts were – Texas, California, Florida, Pennsylvania, and New York. The environmental public works categories showed September gains for river/harbor development, up 41 percent; and water supply construction, up 18 percent; while sewer construction slipped 1 percent. The miscellaneous public works category dropped 35 percent in September, continuing to recede from its strong volume registered during the first half of 2017 that reflected the start of several pipeline projects. The electric utility and gas plant category improved 10 percent in September, and included the start of three large gas-fired power plants, with two located in Pennsylvania ($750 million and $700 million), and one located in California ($550 million).
The no change for total construction starts on an unadjusted basis during the January-September period of 2017 was the result of a varied pattern by major sector. Nonresidential building advanced 8 percent year-to-date, with institutional building up 18 percent while commercial building settled back 7 percent. The manufacturing plant category, up 35 percent so far in 2017 (aided by the start of several large petrochemical plants), contributed to the nonresidential building year-to-date improvement. Residential building increased 1 percent year-to-date, as 7 percent growth for single family housing outweighed a 13 percent decline for multifamily housing. Nonbuilding construction year-to-date dropped 11 percent, reflecting the 38 percent plunge for electric utilities/gas plants while public works was down only a slight 1 percent. By geography, total construction starts during the first nine months of 2017 showed this performance relative to a year ago – the Northeast, up 21 percent; the South Atlantic, up 2 percent; the West, up 1 percent; the South Central, down 7 percent; and the Midwest, down 12 percent. The 7 percent decline in the South Central reflected in part the comparison to last year that included $6.2 billion for two liquefied natural gas terminals, while the 12 percent decline in the Midwest reflected in part the comparison to last year that included the $3.8 billion Dakota Access pipeline and the $900 million Wanda Vista multifamily high-rise in Chicago.