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April Construction Slips One Percent


By Mark S. Kuhar

New construction starts in April settled back 1 percent to a seasonally adjusted annual rate of $473.0 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial.The public works sector retreated from its elevated pace in March, and housing experienced a slight loss of momentum. Highway and bridge construction in April retreated 25 percent.

Meanwhile, nonresidential building in April showed some improvement after its lackluster performance during the previous two months. On an unadjusted basis, total construction starts in the January-April period of 2013 came in at $141.1 billion, down 5 percent from the same period a year ago. The 2013 year-to-date amount for total construction was pulled down by a sharply reduced volume of new electric utility starts. If electric utilities are excluded, total construction starts would be up 12 percent year-to-date, with most of the lift coming from this year’s stronger rate of homebuilding.

“Total construction starts during the early months of 2013 have been able to stay close to last year’s average pace, but the moderate upward trend that was present last year has yet to resume,” stated Robert A. Murray, vice president of economic affairs for McGraw Hill Construction.

“The housing market for the most part has maintained its recent strength, even with a slight pause in April, but new electric utility starts have slowed significantly from last year’s record volume.

The boost that had been expected to come in 2013 from nonresidential building is at best only beginning to take hold, as the pickup in April followed weak activity in February and March.

“One relative bright spot so far in 2013 has been a stronger-than-expected amount of public works construction, although its April downturn may well be a sign of diminished activity to come, Murray said.

Nonbuilding Construction
Nonbuilding construction in April dropped 7 percent to $130.8 billion (annual rate). The moderate decline followed substantial volatility during the previous two months, with nonbuilding construction soaring 46 percent in March after plunging 33 percent in February.

The public works portion of nonbuilding construction decreased 15 percent in April after its heightened March activity, as declines were reported for most of the public works project types.

Highway and bridge construction in April retreated 25 percent, following a 31 percent jump in March. April’s rate of highway and bridge construction was down 13 percent from the average pace reported for 2012 as a whole, despite the April start of a $128 million highway project in New Jersey and a $108 million highway project in California.

The environmental public works categories weakened considerably in April, with river/harbor development, down 13 percent; sewer systems, down 31 percent; and water supply systems, down 35 percent.

Miscellaneous public works, which is comprised of such diverse project types as mass transit and pipelines, was the only public works category to register an April gain, rising 23 percent.

Lifting the miscellaneous public works category in April were three large rail-related projects – an $877 million segment of the RTD Eagle P3 Project in the Denver area, the $595 million BART South Bay Extension in San Jose, Calif., and the $300 million RTD I-225 Light Rail Line in Aurora, Colo.

Electric utility construction in April increased 52 percent from a very weak March, although the April level of activity was still low by recent standards – down 47 percent from this category’s average monthly pace during 2012.

Large electric utility projects that contributed to the April gain were a $740 million natural gas-fired power plant in New Jersey, a $370 million wind farm in Kansas and a $270 million gas-fired power plant in Colorado.

The 5 percent decline for total construction starts on an unadjusted basis during the first four months of 2013 reflected a steep 33 percent drop for nonbuilding construction.

Residential Building
Residential building, at $198.0 billion (annual rate), eased back 1 percent in April. Single-family housing in April decreased 1 percent, and during the past two months it has basically leveled off following the steady increases shown over the past year. The rate of activity for single-family housing in April was still elevated by recent standards – up 20 percent from its average monthly pace during 2012.

By region, reduced activity in April was registered by the South Atlantic and the West, each down 5 percent, which slightly outweighed gains in the South Central, up 1 percent; the Midwest, up 4 percent; and the Northeast, up 6 percent.

Multifamily housing in April slipped 2 percent from the previous month, although like single-family housing it was still elevated by recent standards – up 19 percent from its average monthly pace during 2012.

Large projects that supported the multifamily total in April were the following – a $225 million apartment building in New York, the $191 million apartment portion of a $240 million mixed-use building in Jersey City, N.J., and a $170 million condominium tower in Honolulu.

Through the first four months of 2013, the top five metropolitan areas in terms of the dollar amount of new multifamily starts were the following – New York, Miami, Boston, Washington, D.C., and Los Angeles.

Residential building during the January-April period of 2013 climbed 33 percent relative to last year, with similar gains for single-family housing, up 33 percent; and multifamily housing, up 34 percent.

Nonresidential Building
Nonresidential building in April grew 6 percent to $144.3 billion (annual rate), showing improvement after a weak March, although still 7 percent below its average monthly pace during 2012.

The commercial segment in April was mixed by project type. Office construction climbed 58 percent, lifted by the start of the $400 million Prudential Financial Office Tower 1 in Newark, N.J. Store construction in April increased 5 percent, helped by groundbreaking for such projects as a $46 million shopping center in the Bronx, N.Y., and a $40 million outlet mall in West Palm Beach, Fla.

On the negative side, warehouse construction in April fell 11 percent, even with the start of a $70 million distribution center in Bethel, Pa., while hotel construction dropped 9 percent.

Manufacturing plant construction, which can be volatile on a month-to-month basis, decreased 49 percent in April. Despite the decline for the category as a whole, manufacturing plant construction did include the April start of a $290 million diesel refinery in North Dakota.

The institutional segment of nonresidential building was also mixed by project type in April.

The largest percentage gain was reported for transportation terminals which jumped 238 percent, with the upward push coming from $258 million for terminal work on the Second Avenue Subway line in New York and $100 million for renovation work on Terminal A at Dallas-Ft. Worth International Airport.

Healthcare facilities strengthened in April after a weak March, rising 48 percent with the aid of such projects as an $830 million Stanford University medical center in Palo Alto, Calif., and a $226 million Emory University treatment center in Atlanta.

Amusement-related work advanced 6 percent in April, supported by groundbreaking for the $169 million casino portion of a $400 million casino and garage project in Baltimore.

Educational facilities, the largest nonresidential building category, dropped 19 percent in April.

The latest month did include the start of a $100 million high school modernization in Washington, D.C., but this was not enough to avert another decline for educational facilities.

Weaker activity was also reported in April for public buildings (courthouses and detention facilities), down 17 percent; and churches, down 27 percent.

Nonresidential building during this year’s January-April period fell 8 percent, weighed down by a 14 percent drop for the institutional categories.

Commercial building on a year-to-date basis showed no change from last year, while the manufacturing building category was down a slight 1 percent.