New construction starts in September climbed 16 percent to a seasonally adjusted annual rate of $507.2 billion, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. The nonbuilding construction sector (public works and electric utilities) led the way, helped in particular by a massive natural gas plant and several very large electric utility projects.
Meanwhile, nonresidential building retreated after its improved performance in August, and residential building eased back slightly. Through the first nine months of 2012, total construction starts on an unadjusted basis came in at $349.6 billion, up 5 percent compared to the same period a year ago.
The latest month's data lifted the Dodge Index to 107 (2000=100), up from 92 in August. This marked the second highest reading for the Dodge Index so far in 2012, following the 115 reported in April, which benefitted from the start of an $8.5 billion nuclear power plant in South Carolina.
“The robust pace for electric utility and gas plant construction during 2012 has occasionally produced volatility for total construction on a month-to-month basis,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “If electric utilities and gas plants are excluded, the level of construction starts in 2012 would be up 2 percent year-to-date, helped by this year's further growth for multifamily housing and the emerging recovery for single family housing. As for the other construction sectors, commercial building has shown some strengthening during 2012 – while its dollar amount has grown less than 1 percent year-to-date, square footage is up 16 percent. However, decreased activity continues to be reported in 2012 for institutional building, manufacturing plants, and public works. Going into 2013, it's not expected that electric utilities will be able to maintain the record pace witnessed in 2011 and 2012, and tight government budgets will restrain the institutional building and public works sectors. It will be up to housing and commercial building to provide upward momentum, and the impending ‘fiscal cliff' makes continued growth for these sectors less certain.”
Nonbuilding construction in September soared 67 percent to $197.9 billion (annual rate). The main lift came from a 335 percent surge for the electric utility and gas plant category, as a $4.8 billion liquefied natural gas plant in Louisiana (the Sabine Pass Liquefaction Project) was included as a September construction start. Without this project, the gains for several levels of construction activity in September would have been more moderate – electric utilities and gas plants, up 60 percent; nonbuilding construction, up 19 percent; and total construction, up 3 percent.
There were six electric utility projects, each valued in excess of $100 million, listed as September construction starts – a $750 million wind farm in Texas, a $484 million transmission line in Nevada and California, two $300 million gas-fired power plants in Texas, a $171 million transmission line in Kansas, and a $122 million wind farm in Michigan.
Public works construction overall was up 10 percent in September, helped by gains from the environmental public works categories. Water supply construction increased 48 percent, aided by the start of a $192 million water quality control plant in California. River/harbor development work in September advanced 38 percent, while sewers rose 19 percent. The “other public works” category, which includes a diverse set of projects, climbed 35 percent in September with the lift coming from a $326 million mass transit rail line in California, a $250 million outdoor sports stadium for Baylor University in Waco Texas, and a $220 million petroleum pipeline in Louisiana and Mississippi.
On the negative side, highways and bridges settled back in September, falling 1 percent and 24 percent, respectively. For the first nine months of 2012, highways and bridges together dropped 10 percent compared to last year, including construction start declines for these states – Texas, down 41 percent; Ohio, down 19 percent; and Florida, down 16 percent.
Nonresidential building, at $139.0 billion (annual rate), fell 5 percent in September, retreating after the 7 percent gain in the previous month. The institutional sector showed declines for the majority of its project types. The educational building category decreased 16 percent after its August upturn, despite the start of a $110 million science and research center for Temple University in Philadelphia, as well as groundbreaking for three large high schools located in Massachusetts ($105 million), Minnesota ($78 million), and Texas ($70 million).
The transportation terminal category in September dropped 40 percent, although it did include $148 million for phase 1 of the Moynihan Station project in New York. Also weakening in September were amusement-related work, down 27 percent; and churches, down 18 percent. On the plus side, moderate gains in September were registered by healthcare facilities, up 5 percent; and public buildings (courthouses and detention facilities), up 2 percent.
The commercial categories in September showed stronger activity relative to August. Warehouse construction advanced 60 percent, with the help of such projects as a $57 million distribution center for Dollar Tree in Windsor, Conn. Hotel construction increased 37 percent, aided by a $68 million addition to a hotel in Miami, plus two hotel renovations for Westin properties in Atlanta ($45 million) and Cleveland ($36 million).
Stores and shopping centers, up 11 percent, included $91 million for the retail portion of the Brickell CitiCentre mixed-use project in Miami (with the entire complex having an estimated construction start cost of $500 million). Office construction grew 9 percent in September, and included $43 million for the office portion of the Brickell CitiCentre project, as well as corporate office buildings that reached groundbreaking in Canton, Ohio ($42 million); Overland Park, Kan. ($35 million); and Plano, Texas ($32 million). Manufacturing plant construction in September dropped 10 percent compared to August.
Residential building in September slipped 1 percent to $170.3 billion (annual rate). Multifamily housing retreated 10 percent after its 43 percent jump in August; although down for the month still maintains the broader upward trend for this project type. Large multifamily projects that reached groundbreaking in September included $231 million for the condominium portion of the Brickell CitiCentre project in Miami. There were also two large multifamily projects that started in San Francisco during September – a $119 million condominium tower and an $82 million apartment building.
Single-family housing maintained its gradual upward movement that's been present throughout much of 2012, growing 2 percent in September. The pace for single family housing in September was 23 percent higher than what was reported back in January.
The 5 percent increase for total construction on an unadjusted basis during the January-September period of 2012 was the result of heightened activity for two of the three main construction groups. Residential building climbed 26 percent, with year-to-date gains of 25 percent for single-family housing and 30 percent for multifamily housing. Nonbuilding construction was up 6 percent year-to-date, as a 27 percent hike for electric utilities and gas plants outweighed a 3 percent drop for public works. Nonresidential building was the one major construction group to register a year-to-date decline, falling 12 percent.
The nonresidential decline came as the result of this pattern by segment – commercial building, up a slight 0.5 percent; institutional building, down 16 percent; and manufacturing building, down 29 percent. The year-to-date decline for nonresidential building has been getting smaller as 2012 has proceeded.
By geography, total construction starts during the first nine months of 2012 showed a large gain for the South Atlantic, up 33 percent; with much of the upward push coming from the start of two massive nuclear power projects in Georgia and South Carolina. If these two projects are excluded, then total construction starts in the South Atlantic would be up 6 percent. Year-to-date gains for total construction were also reported for the Midwest, up 6 percent; and the South Central, up 2 percent. Two regions registered year-to-date declines for total construction – the Northeast, down 5 percent; and the West, down 9 percent.