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Construction Starts Climb 8 Percent in 2015

For 2015 as a whole, total construction starts climbed 8 percent to $645.5 billion, according to Dodge Data & Analytics. This continues the pattern of moderate expansion for total construction starts registered during the previous three years – 2012, up 12 percent; 2013, up 11 percent; and 2014, up 9 percent.

Highway and bridge construction in 2015 climbed 10 percent.

“The construction start statistics reveal continued expansion for construction activity during 2015, although the path over the course of the year was not smooth,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “A strong first half of 2015 was followed by a 20 percent loss of momentum in the third quarter and then a slight 1 percent rebound in the fourth quarter, as the expansion began to show that it was getting back on track. Several factors contributed to the early 2015 strength – more growth for the commercial and institutional segments of nonresidential building, gradual improvement for single family housing alongside the continued rise by multifamily housing, and a surge of electric utility and gas plant projects that featured the start of several massive liquefied natural gas (LNG) terminals in the Gulf Coast region.

“The third quarter of 2015 witnessed a steep 30 percent drop for nonresidential building, as the manufacturing building category and in particular energy-related projects fell sharply,” Murray continued. “In addition, the commercial and institutional building segments of nonresidential building settled back, as earlier gains may have overshot their underlying growth trend while uncertainty in the economic and political environment dampened investment in general. Residential building slipped 3 percent in the third quarter, due to flattening activity for single family housing, while nonbuilding construction plunged 32 percent as the result of a sharp reduction by the electric utility and gas plant category. On the plus side, the fourth quarter of 2015 showed the commercial and institutional segments of nonresidential building beginning to pick up the pace once again, and supportive market fundamentals (occupancies and rents) should help renewed growth for these segments going into 2016. The public works portion of nonbuilding construction also began to pick up the pace towards the end of 2015, and should be aided by the December passage of fiscal 2016 federal appropriations as well as the new $305 billion five-year federal transportation act (the Fixing America’s Surface Transportation Act).”

For 2015 as a whole, nonresidential building fell 8 percent to $204.2 billion. The decline followed a 24 percent increase in 2014, and the 2015 annual amount was still 14 percent above the level reported for 2013.

Much of the decline for nonresidential building in 2015 reflected a 39 percent reduction for the manufacturing plant category following its 87 percent surge in 2014, as weaker energy prices in 2015 led to a pullback for large petrochemical plants. If the manufacturing plant category is excluded, nonresidential building in 2015 would be down a modest 2 percent after a 17 percent hike in 2014.

The institutional building group in 2015 settled back 4 percent after advancing 13 percent in 2014. Decreased activity was reported for healthcare facilities, down 10 percent, as well as such categories as public buildings, down 3 percent; amusement-related work, down 6 percent; and transportation terminals, down 11 percent.

The educational facilities category managed to rise 1 percent in 2015 on top of its 15 percent gain in 2014. The top five states for new educational facility starts in 2015, ranked by dollar volume, were – Texas, New York, California, Massachusetts and Ohio.

The religious buildings category was able to register an 8 percent gain in 2015, although its level of activity remains quite low by recent historical standards.

The commercial building group in 2015 held steady with the dollar amount registered in 2014, when activity climbed 22 percent. Hotel construction showed the largest annual gain of the commercial categories in 2015, rising 15 percent.

Large hotel projects that reached groundbreaking in 2015 included a $411 million ocean resort expansion in Lahaina, Hawaii, and the $350 million McCormick Place Marriott Marquis Hotel in Chicago.

Store construction grew 3 percent in 2015, led by the $600 million retail portion of the $2.5 billion 30 Hudson Yards building in New York. The garage and service station category slipped 1 percent in 2015, and warehouse construction retreated 3 percent.

The office category in 2015 pulled back 5 percent, although it’s important to note that the decline followed a 37 percent increase in 2014 that was led by such projects as the $2.3 billion office portion of the $2.5 billion Apple corporate headquarters in Cupertino, Calif.

Large office projects that reached groundbreaking during 2015 included the $1.9 billion office portion of the $2.5 billion 30 Hudson Yards building in New York and the $1.2 billion One Manhattan West office building, also in New York.

The top five metropolitan areas ranked by the dollar amount of new office starts in 2015 were – New York, Dallas-Ft. Worth, Washington, D.C., Chicago, and Boston.

The 2015 amount for residential building was $265.4 billion, up 14 percent and stronger than the 10 percent gain that was reported for 2014. Single-family housing grew 13 percent in dollar terms, showing some improvement after the 3 percent rise in the previous year.

The regional pattern for single family housing in 2015 revealed gains in all five major regions, to varying degrees – the West, up 23 percent; the South Atlantic, up 17 percent; the South Central, up 7 percent; the Midwest, up 6 percent; and the Northeast, up 2 percent.

Multifamily housing in 2015 increased 18 percent, not quite as fast as the 32 percent hike reported in 2014, but marking the sixth straight year of double-digit growth. By major region, multifamily housing showed this performance in 2015 – the Northeast, up 35 percent; the Midwest, up 17 percent; the South Central, up 11 percent; the South Atlantic, up 8 percent; and the West, up 6 percent.

The top five metropolitan areas in terms of the 2015 dollar amount of multifamily starts were – New York, Miami, Washington, D.C., Los Angeles, and Boston. Metropolitan areas ranked 6 through 10 were – Chicago, Seattle, Dallas-Ft. Worth, Houston and San Francisco.

For the full year 2015, nonbuilding construction climbed 23 percent to $176.0 billion, a sharp increase after the 8 percent reduction in 2014. The substantial nonbuilding gain for 2015 was due entirely to the electric power and gas plant category soaring 141 percent.

The first half of 2015 included four massive LNG-related projects on the Gulf Coast – the $9.0 billion export terminal in Corpus Christi, Texas, the $8.4 billion Sempra export terminal in Hackberry, La., the $6.0 billion export terminal in Freeport, Texas, and a $1.0 billion receiving terminal in Ingleside, Texas.

Overall, the gas plant segment in 2015 was more than four times the amount reported during 2014, while the electric power-related segments advanced 69 percent. In contrast, public works construction in 2015 showed no change from the previous year, as the result of a mixed performance by project type.

Highway and bridge construction in 2015 climbed 10 percent following a 13 percent decline in the previous year, helped by such starts as the $2.3 billion Interstate 4 Ultimate Project in central Florida.

The environmental public works categories registered moderate declines in 2015, with sewer and water supply construction each down 4 percent and river/harbor development down 9 percent. The miscellaneous public works category fell 16 percent in 2015, relative to its elevated amount in 2014 that included the start of several large mass transit projects.

The 8 percent gain for total construction starts at the national level in 2015 was the result of greater activity in all five major regions. Leading the way was the Northeast, up 17 percent; followed by the South Central, up 16 percent; the South Atlantic, up 4 percent; the Midwest, up 3 percent; and the West, up 2 percent.