November Construction Retreats; Residential Still Up
- Published: Monday, 23 December 2013 15:37
At a seasonally adjusted annual rate of $524.8 billion, new construction starts in November fell 11 percent from the previous month, according to McGraw Hill Construction, a division of McGraw Hill Financial. The downturn followed heightened activity in October, which showed the strongest pace for construction starts so far during 2013.
Both nonresidential building and nonbuilding construction pulled back from their elevated October amounts. Highway construction retreated 3 percent. At the same time, residential building showed modest growth in November, continuing the steady upward trend that’s been present during most of 2013.
“The monthly construction start statistics will often show an up-and-down pattern, given the amount of large projects that are included in any given month,” stated Robert A. Murray, chief economist for McGraw Hill Construction. “Although November witnessed a decline from the heightened activity in September and October, the construction start statistics when viewed in the context of 2013 as a whole are still trending upward. Housing during 2013 has strengthened on a consistent basis. Nonresidential building is gaining momentum, aided by improving activity for commercial building from low levels while the institutional building sector stabilizes after a lengthy decline. Nonbuilding construction is weakening due to a sharply reduced amount of new electric utility starts, but its public works component has shown surprising resilience this year. For 2014, the upward trend for total construction starts is expected to continue. One plus for construction and the economy going forward is the recent budget pact approved by the U.S. Congress, since it removes the uncertainty that would have come with the threat of another government shutdown in early 2014.”
Nonresidential building in November dropped 17 percent to $179.3 billion (annual rate), following its elevated activity in October. The manufacturing plant category plunged 86 percent, after being lifted in October by the start of three massive projects each valued in excess of $1 billion. In contrast, the largest manufacturing-related projects reported as November starts were a $94 million biotechnology plant in North Carolina and a $75 million pipe and tube plant in Texas.
Excluding the manufacturing category, nonresidential building in November would have been up 16 percent, supported by the month’s 31 percent jump for the commercial building group.
Hotel construction in November surged 212 percent, boosted by $476 million for the hotel portion of the $700 million 67-story Korean Air Hotel in Los Angeles. Also reported as a November start was $191 million for the hotel portion of a $300 million hotel resort and casino in Durant, Okla. Office construction in November climbed 26 percent, maintaining the growing momentum that’s been present during the second half of 2013. Large office projects reported as November starts were the $336 million Transbay office tower in San Francisco, the $265 million State Farm office complex in Tempe, Ariz., and $160 million for the office portion of the Korean Air Hotel project in Los Angeles.
Warehouse construction was particularly strong in November, advancing 82 percent with the help of such projects as a $90 million distribution facility in Union, Ohio, and an $85 million Amazon distribution center in Kenosha, Wis. Store construction was the one commercial category to decline in November, dropping 23 percent with the largest project being a $45 million outlet mall in Tejon Ranch, Calif.
The institutional building group in November slipped 3 percent. Healthcare facilities fell 41 percent, sliding back for the second month in a row after a particularly strong amount in September. The largest healthcare facility projects reported as November starts were a $136 million hospital in Chicago and a $90 million hospital expansion in Long Island City, N.Y.
The educational building category in November decreased 8 percent from its improved pace in October, with the largest education-related projects being a $125 million museum expansion in Potomac, Md., and a $100 million research facility in Maywood, Ill.
The smaller institutional categories showed strong percentage gains in November after a generally weak October. Amusement-related construction advanced 84 percent, led by the start of the $763 million Vikings Multipurpose Stadium in Minneapolis as well as $109 million for the casino portion of the hotel resort and casino in Durant, Okla.
Transportation terminal construction in November rose 13 percent, supported by $125 million for the redevelopment of the George Washington Bridge Bus Station in New York. The public buildings and religious categories in November showed large percentage gains from very low October levels, rising 21 percent and 33 percent, respectively.
Nonbuilding construction, at $127.1 billion (annual rate), dropped 21 percent in November. The public works portion of nonbuilding construction fell 23 percent, with the largest decline registered by bridge construction, down 73 percent.
The bridge category in October had been boosted by $2.8 billion for the start of structural work on the Tappan Zee Bridge replacement project across the Hudson River in the Tarrytown, N.Y., area. In November, the largest bridge project reported as a construction start was a $125 million bridge reconstruction project in Fall River, Mass.
Additional public works categories with November declines were highway construction, down 3 percent; and sewers, down 32 percent. On the plus side, both river/harbor development and water supply construction showed improvement from a lackluster October, advancing 47 percent and 3 percent, respectively.
The miscellaneous public works category, which includes such diverse project types as pipelines and mass transit, grew 8 percent in November with the help of the $300 million Keystone Pipeline Gulf Coast Expansion in Texas. Electric utility construction in November edged up 1 percent, staying basically unchanged from its sharply reduced amount in October. The largest electric utility project reported as a November start was a $400 million wind farm in the state of Washington.
Residential building in November improved 1 percent to $218.5 billion (annual rate). The upward push came from the multifamily side of the housing market, which climbed 18 percent. Large multifamily projects reported as November starts included a $450 million multifamily tower and the $126 million condominium portion of a $300 million condo hotel, both located in New York.
Also reaching groundbreaking in November were a $114 million multifamily tower in San Francisco, a $100 million apartment complex in Huntington Station, N.Y., and a $100 million multifamily tower in Chicago.
Single-family housing in November receded 3 percent, pulling back after a 4 percent gain in October. The November pace for single-family housing was still 12 percent above what was reported at the outset of 2013.