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October Construction Falls 14 Percent

Much of the Decline Was Due To A Sharp Pullback By the Electric Power and Gas Plant Category.

By Mark S. Kuhar

The value of new construction starts retreated 14 percent in October to a seasonally adjusted annual rate of $434.9 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Much of the decline was due to a sharp pullback by the electric power and gas plant category after a robust September. If this volatile project type is excluded from the month-to-month comparisons, total construction starts in October would register a 3 percent gain. Greater activity was reported in October for the public works sector, while both nonresidential building and housing settled back.

Nonbuilding Construction
Nonbuilding construction in October dropped 32 percent to $133.4 billion (annual rate), retreating after the prior month's 68 percent jump. September had been lifted by a 335 percent surge for the electric utility and gas plant category, as a $4.8 billion liquefied natural gas plant (the Sabine Pass Liquefaction Project) was included as a September start, along with six power plant and transmission line projects valued each in excess of $100 million. For October, the largest electric utility and gas plant project was $88 million for transmission line work in Massachusetts, contributing to a 93 percent decline for the category.

In contrast, the public works sector in October climbed 19 percent. The miscellaneous public works category, which includes such diverse project types as site work, mass transit, and pipelines, soared 52 percent in October. The boost to miscellaneous public works came from $2.0 billion related to work on the Keystone Pipeline Gulf Coast Expansion, located in Oklahoma and Texas.

Highway construction in October advanced 23 percent, aided by $900 million for work on the I-95 HOV/HOT Lanes project in Virginia. The large increase marked a departure from what has been a declining trend in 2012 for highway construction, which on a year-to-date basis was still down 11 percent. Bridge construction in October retreated 7 percent, although the month did include $94 million for bridge reconstruction work in Ohio. The environmental public works categories were led by a 41 percent increase for river/harbor development, which reflected the start of a $331 million explosives handling wharf in the state of Washington. Sewers and water supply systems dropped a respective 16 percent and 5 percent in October.

Nonresidential Building
Nonresidential building, at $131.6 billion (annual rate), decreased 4 percent in October. The manufacturing plant category plunged 73 percent, continuing to pull back from the improved activity that was reported earlier in 2012.

Warehouse construction also weakened substantially in October, falling 33 percent. Office construction in October slipped 3 percent, although the month did include the start of several noteworthy projects – the $216 million Tower at PNC Plaza in Pittsburgh, the $110 million Energy Center III office tower in Houston, a $76 million municipal office building in Boston, and a $50 million corporate headquarters renovation for TJX in Marlborough, Mass.

On the institutional side, the educational facilities category continued to lose momentum, dropping 3 percent. Even with the decline, several large education projects reached groundbreaking in October. More considerable October declines were registered by amusement-related work, down 22 percent; and transportation terminals, down 50 percent.

Residential Building
Residential building in October dropped 2 percent to $169.9 billion (annual rate). The downward pull came from multifamily housing, which retreated 7 percent from September

Large multifamily projects that reached groundbreaking in October included the $200 million Insignia Residential Towers in Seattle and $149 million for the multifamily portion of the City Point project in Brooklyn, N.Y. Single-family housing in October was unchanged from September, maintaining the enhanced activity that's been established over the course of 2012.