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Construction Spending Rises in 2013

For 2013 as a whole, total construction starts advanced 6 percent to $516.8 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. This follows the 10 percent gain reported for 2012 (which drew support from a record amount of new electric utility starts that year) and modest 2 percent gains in both 2010 and 2011. If the volatile electric utility category is excluded, total construction starts in 2013 would be up 14 percent, following a 9 percent gain in 2012 and essentially flat activity during 2010 and 2011.

“The construction industry in 2013 made progress towards establishing a more broad-based recovery, after several years in which the upturn was more limited in scope,” stated Robert A. Murray, chief economist for McGraw Hill Construction. “Housing continued to lead the way, strengthening throughout much of 2013, and it was joined by a faster pace for commercial building, albeit from low levels. The institutional building sector registered a considerably smaller decline than in prior years, as its lengthy downturn appears to be ending. The public works sector in 2013 showed surprising strength, helped by the start of several major projects even amidst restrained government spending. Running counter in 2013 was a steep drop for new electric utility starts, after the robust amount reported in 2012. For 2014, the prospects look good for total construction, with growth anticipated for housing and commercial building, while the institutional building sector at least stabilizes.”

For 2013 as a whole, nonresidential building increased 7 percent to $168.6 billion, shifting to an upward direction after the 5 percent decline reported for 2012. The commercial categories overall advanced 16 percent, faster than the 13 percent gain witnessed in 2012. The strongest gain by commercial category was registered by hotels, up 28 percent; followed by warehouses, up 27 percent; office buildings, up 17 percent; and stores, up 1 percent.

The small 2013 increase for stores was limited by the comparison to 2012 that included the $400 million renovation to Macy’s flagship department store in New York, N.Y. The manufacturing building category in 2013 surged 36 percent, helped by the two large chemical plants in Louisiana reported as December starts as well as by such projects as a $1.7 billion fertilizer plant in Iowa, a $1.7 billion natural gas processing plant in West Virginia, and a $1.5 billion industrial gas products plant in Louisiana. The institutional building group during 2013 decreased 3 percent, less severe than declines of 9 percent in 2012 and 11 percent in 2011.

The two largest institutional categories performed as follows – educational buildings, down 1 percent; and healthcare facilities, down 6 percent. The smaller institutional categories showed this pattern for 2013 – amusement-related work, up 25 percent; transportation terminals, down 2 percent; churches down 11 percent; and public buildings, down 27 percent.

The 2013 amount for residential building was $205.5 billion, up 24 percent, and close to the 31 percent gain reported for 2012. Single family housing in dollar terms climbed 26 percent, similar to the prior year’s 29 percent hike.

The regional pattern for single family housing in 2013 showed increases for all five major regions, as follows – the South Atlantic, up 33 percent; the Midwest, up 27 percent; the West and Northeast, each up 26 percent; and the South Central, up 18 percent. Multifamily housing in 2013 advanced 16 percent, showing additional growth on top of the increases in 2010 (up 23 percent), 2011 (up 33 percent), and 2012 (up 37 percent).By major region, multifamily housing revealed this performance in 2013 – the Midwest, up 26 percent; the Northeast, up 24 percent; the South Atlantic, up 21 percent; the West, up 13 percent; and the South Central, down 6 percent.

The top five metropolitan areas in terms of the 2013 dollar amount of multifamily starts, with the percent change from 2012, were – New York, up 23 percent; Boston, up 74 percent; Washington, D.C., unchanged from the prior year; Miami, up 12 percent; and Los Angeles, down 24 percent. Metropolitan areas ranked 6 through 10 for multifamily starts were – Dallas-Ft. Worth, down 6 percent; Chicago, up 52 percent; Seattle, unchanged from the prior year, San Francisco, up 12 percent; and Denver, up 17 percent.

For the full year 2013, nonbuilding construction dropped 12 percent to $142.7 billion. After achieving a record high in current dollar terms in 2012, new electric utility starts plunged 57 percent in 2013. In contrast, the public works portion of nonbuilding construction increased 9 percent in 2013, a resilient performance given concerns that tight government budgets would dampen activity.

Of the public works project types, bridge construction showed the largest percentage gain, climbing 55 percent. Aside from what was entered into the December construction start figures, large bridge projects in 2013 included the $3.1 billion Tappan Zee Bridge replacement project across the Hudson River in New York and $1.6 billion for work on the Ohio River Bridges in the Louisville, Ky., and southern Indiana area.

With highway construction up 10 percent in 2013, highway and bridge construction together registered a 21 percent gain for the full year. The top five states for highway and bridge construction in 2013, ranked by the dollar volume of activity, were – Texas, New York, California, New Jersey and Virginia.

The environmental public works categories posted annual gains for 2013, as follows – river/harbor development, up 30 percent; water supply systems, up 10 percent; and sewers, up 1 percent. The miscellaneous public works category fell back 18 percent in 2013, following a 61 percent increase in 2012, due primarily to a sharply reduced amount of new petroleum and natural gas pipeline starts.

The 6 percent gain for total construction starts at the national level in 2013 was the result of gains in four of the five major regions. Showing the strongest growth was the Northeast, up 17 percent; followed by the Midwest, up 9 percent; the West, up 8 percent; and the South Central, up 3 percent.

The South Atlantic was the one major region to experience a decline in 2013, dropping 3 percent. The South Atlantic’s shortfall reflected the comparison to 2012 that included the start of two massive nuclear facilities, located in Georgia and South Carolina. If electric utilities are excluded from the construction start statistics in the South Atlantic, then total construction for that region in 2013 would be up 19 percent.