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June Construction Starts Jump 15 Percent

New construction starts in June climbed 15 percent to a seasonally adjusted annual rate of $436.8 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Highways and bridges climbed 9 percent.

The gains followed particularly weak activity in May, and helped the pace of contracting during this year’s second quarter stay close to its first quarter level. June featured a substantial increase for the nonbuilding construction sector, led by the start of several large electric utility projects. Nonresidential building also registered improvement in June, while housing edged up slightly. During the first six months of 2011, total construction starts on an unadjusted basis came in at $198.2 billion, down 7 percent from the same period a year ago.

The June data lifted the Dodge Index to 92 (2000=100), which is the highest reading so far in 2011. During the first five months of 2011, the Dodge Index had trended downward, moving from 91 in January to 80 in May. “The pattern of construction starts during the early months of 2011 showed a loss of momentum, due largely to renewed weakness for single family housing combined with a pullback for public works and institutional building,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “June’s gain enables the average for this year’s second quarter to be down a modest 2 percent from the first quarter, a milder slowdown than what was being suggested by the data through May. The overall level of construction continues to be weak, but June’s gain is consistent with the sense that construction activity is hovering at a low level, rather than seeing further sustained declines.”


Nonbuilding construction in June soared 34 percent to $163.2 billion (annual rate). The lift came from the electric utility category, which advanced 103 percent in June as it continued to see a robust volume of projects reach the construction start stage. June included the start of a massive $1.3 billion transmission line project in Maine, as well as a $710 million transmission line project in New Jersey.

Other large electric utility projects reported as June starts included two gas-fired power plants, located in North Carolina ($900 million) and California ($440 million), as well as two large wind power facilities, located in Kansas ($350 million) and Texas ($338 million).

The public works sector in June registered a smaller 2 percent gain, reflecting a mixed pattern by project type. Highways and bridges climbed 9 percent in June, making a partial rebound after May’s depressed amount, although remaining below the elevated pace witnessed during 2010 and early 2011. Sewer construction in June grew 4 percent, helped by the start of a $94 million waste-water treatment plant in New Rochelle, N.Y. The miscellaneous public works category increased 14 percent, boosted by the start of airport runway work in Chicago and Boston. Decreased activity in June was reported for water supply systems, down 8 percent; and river/harbor development, down 34 percent.

For the first six months of 2011, nonbuilding construction slipped 1 percent from last year, due to divergent behavior for electric utilities and public works. The electric utility category jumped 164 percent year-to-date, and is on track to set a new high for construction starts in current dollar terms. In contrast, public works construction is down 25 percent year-to-date, as the result of decreased federal and state spending, as well as the comparison to the first half of 2010 that saw substantial federal stimulus support for public works projects.


Nonresidential building, at $153.6 billion (annual rate), climbed 11 percent in June. The commercial categories showed healthy percentage gains, moving up from May’s weak activity. Office construction in June rose 39 percent, boosted by the start of a $160 million corporate campus in the Houston metropolitan area, as well as by the start of a $147 million federal building renovation at Fort Snelling, Minn., and a $60 million renovation to a corporate headquarters in Seattle.

Hotel construction jumped 55 percent, moving up from a particularly depressed May, and helped by the start of a $50 million hotel renovation in Philadelphia. Warehouse construction in June increased 30 percent, aided by the start of a $75 million distribution center for in South Carolina, while store construction improved 11 percent. The manufacturing plant category, which had been seeing an elevated pace of activity for much of 2011, settled back 13 percent in June.

On the institutional side of the nonresidential market, healthcare facilities in June rose 16 percent, continuing to strengthen after the sluggish activity earlier in 2011. June included groundbreaking for a $412 million medical center in Dallas and a $316 million naval hospital at Camp Pendleton, Calif., as well as four other hospital projects valued at $100 million or greater.

The amusement-related category increased 90 percent in June, aided by the $122 million addition to a performing arts center in San Antonio as well as two large casino development projects in Ohio. The public buildings category, which has fallen sharply over the past year, bounced back 89 percent in June, reflecting the start of a $250 million courthouse building in Long Beach, Calif.

Educational facilities, the largest institutional category, improved a moderate 4 percent in June. Institutional structure types with June declines were church construction, down 34 percent; and transportation terminals, down 77 percent. The steep drop for transportation terminal work followed heightened levels of activity during April and May.

During the first six months of 2011, nonresidential building was down 9 percent from a year ago, as the institutional building sector fell 20 percent. In contrast, commercial building year-to-date climbed 11 percent, beginning to gain some upward momentum after last year’s very weak volume. The manufacturing plant category year-to-date increased 98 percent, aided by the start of several large manufacturing plants that reached groundbreaking during the first half of this year.


Residential building in June grew 1 percent to $120.1 billion (annual rate). The upward push was provided by multifamily housing, which increased 8 percent after retreating in May. Large multifamily projects that reached groundbreaking in June included a $123 million apartment building in Seattle and a $114 million apartment building in Chicago. During the first half of 2011, the top five metropolitan areas in terms of the dollar amount of new multifamily projects were: New York, Washington D.C., Chicago, Boston and Seattle.

Single family housing in June was unchanged from May, as the result of a varied pattern by region – the Midwest, up 3 percent; the South Central, up 2 percent; the Northeast, up 1 percent; the South Atlantic, down 1 percent; and the West, down 5 percent. Murray noted, “While single family housing in June held steady with May, it was still down 3 percent from its average for all of 2010, and is headed for a year-over-year decline in 2011 after its modest 2010 increase.”

At the six-month mark of 2011, residential building dropped 10 percent from the first half of 2010, with declines reported for single family housing, down 10 percent; and multifamily housing, down 6 percent. The multifamily decline in dollar terms is related to the fact that last year’s first half included several large multifamily renovation projects. At the same time, multifamily housing in dwelling unit terms during the first half of 2011 was up 5 percent compared to last year.

The 7 percent shortfall for total construction starts at the U.S. level during the first six months of 2011 relative to 2010 was due to declines in four of the five major regions – the Midwest, down 12 percent; the Northeast and South Atlantic, each down 10 percent; and the South Central, down 9 percent. The West was the one region to report a year-to-date gain, rising 7 percent with much of the upward push coming from a strong volume of electric utility projects.