February Construction Starts Descend 3 Percent

At a seasonally adjusted annual rate of $697.4 billion, new construction
starts in February dropped 3% from the previous month, according to Dodge
Data & Analytics. The February decline returned construction
starts to the downward path that emerged during the closing months of
2018. Two of the three main construction sectors registered weaker
activity in February – nonbuilding construction fell 8%, due to a
pullback by its public works segment, while residential building slipped
3%. Meanwhile, nonresidential building in February was able to hold
steady with its January pace. During the first two months of 2019, total
construction starts on an unadjusted basis were $99.3 billion, down 12%
from the same period a year ago which had been lifted by the start of
the $2.0 billion NEXUS natural gas pipeline in Ohio and Michigan and the
$1.3 billion domed NFL stadium in Las Vegas NV. On a twelve-month moving
total basis, total construction starts for the twelve months ending
February 2019 were able to remain essentially even with the
corresponding amount for the twelve months ending February 2018.

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The February statistics produced a reading of 148 for the Dodge Index
(2000=100), compared to 153 for January. The 150 average for the Dodge
Index during the first two months of 2019 was the same as the 150
reading in December, which was at the low end of last year’s range of
activity.

“The pace of construction starts has been lackluster in early 2019,”
stated Robert A. Murray, chief economist for Dodge Data & Analytics.
“The public works sector has retreated, likely affected by harsh winter
weather conditions and the fact that fiscal 2019 federal appropriations
for several programs were not finalized until mid-February. With funding
levels now set, including a 2% increase for the federal-aid highway
program, it’s expected that public works will show improvement in coming
months. For residential building, single family housing remains
sluggish, as affordability constraints continue to dampen demand even as
mortgage rates have settled back, while a more cautious lending stance
by banks may now be starting to restrain multifamily development.
Nonresidential building so far in 2019 has not yet seen the same
magnitude of very large projects that reached groundbreaking during
2018. At the same time, market fundamentals for warehouses and office
buildings remain supportive for construction, and the large amount of
funding coming from state bond measures passed in recent years should
contribute to healthy levels of construction activity for such
institutional project types as school construction.”

Nonbuilding construction in February was $153.6 billion (annual
rate), down 8% from January. The public works categories as a group
dropped 15%, retreating for the second month in a row, while the
electric utility/gas plant category climbed 34%. Highway and bridge
construction fell 7% after a 2% decline in January, and February’s
activity was down 12% from the average monthly pace during 2018. Large
highway projects that reached groundbreaking in February were a $185
million highway expansion in Phoenix AZ and a $178 million highway
expansion in San Antonio TX. The miscellaneous public works category,
which includes such diverse project types as pipelines and rail transit
projects, plunged 49% in February after soaring 114% over the previous
two months, with January lifted by the start of the $1.0 billion Midship
natural gas pipeline in Oklahoma. By contrast, the largest miscellaneous
public works project entered as a February construction start was a $127
million natural gas pipeline in New Jersey. Sewer construction in
February retreated 8%, despite the start of a $267 million waste water
treatment plant expansion in the Honolulu HI area. The remaining two
public works project types registered gains in February, with
river/harbor development up 25% and water supply construction up 11%.
The 34% jump for the electric utility/gas plant category in February
reflected the start of two large natural gas-fired power plants, a $1.0
billion plant in Saint Clair MI and a $937 million plant in Willis TX,
plus the start of a $375 million solar power plant in the Valdosta GA
area.

Residential building in February was $299.3 billion (annual
rate), down 3% as both sides of the housing market showed decreased
activity. Multifamily housing fell 7%, retreating after its 17% rebound
in January. Despite the decline, there were still six multifamily
projects valued at $100 million of more that reached groundbreaking in
February. These were led by two projects in the Long Island City area of
the New York NY metropolitan area – the $500 million North Tower and the
$200 million South Tower at the Hunters Point South apartment complex.
The next largest multifamily projects were the $154 million multifamily
portion of the $170 million Archer Green mixed-use complex in the
Jamaica Queens area of New York NY and the $144 million multifamily
portion of the $240 million Hoffman Town Center project (blocks 4 and 5)
in Alexandria VA. The top five metropolitan areas ranked by the dollar
amount of multifamily starts in February were – New York NY, Washington
DC, Dallas-Ft. Worth TX, Miami FL, and San Francisco CA. During the
first two months of 2019, the New York NY metropolitan area comprised
18% of the multifamily dollar amount for the U.S., up from the 16% share
for the full year 2018, although not as high as the 24% share that was
reported for the full year 2015. Single family housing in February
receded 2% from January, continuing the modest slippage that emerged
during last year’s fourth quarter. By geography, single family housing
performed as follows in February relative to January – the West, down
5%; the South Central, down 2%; the South Atlantic, down 1%; the
Midwest, unchanged; and the Northeast, up 7%.

Nonresidential building in February was $244.5 billion (annual
rate), basically the same as January’s volume. The commercial building
categories as a group rose 2%, which followed a 4% gain in January.
Warehouse construction surged 33% in February, led by a $200 million
Amazon distribution facility in Oak Creek WI, an $85 million Costco
distribution center in Katy TX, and a $70 million Goodyear Tire
distribution center in Forney TX. Hotel construction climbed 22%,
reflecting the start of the $372 million hotel portion of the $500
million Circa Resort and Casino in Las Vegas NV. Store construction
improved 11%, helped by the start of the $64 million Macy’s Men’s Store
redevelopment in San Francisco CA, and the commercial garage category
grew 3%. Office construction was the one commercial project type to
report a February decline, falling 21% after its 18% hike in January
that featured such projects as the $550 million Reston Gateway office
complex in Reston VA and the $350 million Hines office tower in Houston
TX. Even with the decline, there were still noteworthy office projects
that were entered as February starts, such as the $375 million Block 185
redevelopment in Austin TX and the $100 million Cannon House office
renovation in Washington DC. There were also several large data center
projects (included in the office category) that reached groundbreaking
in February, led by a $175 million Google data center expansion in
Moncks Corner SC and two data centers in Ashburn VA valued at $120
million each.

The institutional side of nonresidential building was unchanged in
February after the 2% decline reported in January. The healthcare
facilities category had a strong February, increasing 26% with the lift
coming from such projects as the $265 million expansion to the
Children’s Hospital of Wisconsin in Wauwatosa WI and the $176 million
Colorado Center for Personalized Medicine in Aurora CO. Educational
facilities in February advanced 6%, led by the $200 million renovation
of a healthcare research facility at the University of Pittsburgh in
Pittsburgh PA, a $96 million engineering building at the University of
Texas in Austin TX, plus large high school projects in Millersville PA
($87 million), Hammond IN ($78 million), Wentzville MO ($76 million),
and Wimauma FL ($76 million). On the negative side, the public buildings
category plunged 45% after its 59% jump in January that included the
$525 million Utah State Prison relocation in Salt Lake City UT.
Decreased construction starts were also reported in February for
transportation terminal projects, down 35%; church construction, down
23%; and amusement-related work, down 7%. The manufacturing plant
category dropped 14% in February after a 13% January gain, although the
latest month did include the start of a $135 million lumber production
facility in Albany GA and a $105 million window manufacturing plant in
Goodyear AZ.

The 12% shortfall for total construction starts on an unadjusted basis
during the first two months of 2019 compared to last year was the result
of lower activity for each of the three main sectors. Residential
building fell 15% year-to-date, with single family housing down 13% and
multifamily housing down 17%. Nonresidential building dropped 13%
year-to-date, with commercial building down 5%, institutional building
down 18%, and manufacturing building down 29%. Nonbuilding construction
retreated 6% year-to-date, as a 17% decline for public works was
partially offset by a 116% surge for the electric utility/gas plant
category after a very weak first two months of 2018. By geography, total
construction starts for the first two months of 2019 versus the same
period a year ago performed as follows – the Midwest, down 24%; the
Northeast, down 15%; the South Central, down 10%; the South Atlantic,
down 9%; and the West, down 8%.

Additional insight is provided by looking at twelve-month moving totals,
in this case the twelve months ending February 2019 versus the twelve
months ending February 2018, which offers less volatility than is
present with year-to-date comparisons of just two months. On this basis,
total construction starts for the most recent twelve months essentially
matched the amount of the previous period. By major sector, residential
building grew 2%, with 2% gains for both single family and multifamily
housing. Nonresidential building was unchanged from the previous period,
with manufacturing building up 21%, commercial building up 2%, and
institutional building down 5%. Nonbuilding construction dropped 4%,
with public works down 2% and electric utilities/gas plants down 16%. By
geography, total construction starts showed this pattern for the most
recent twelve months compared to the previous period – the South
Central, up 9%; the West, up 3%; the Midwest and South Atlantic, each
unchanged; and the Northeast, down 15%.

February 2019 Construction Starts
Monthly Summary of Construction Starts
Prepared by Dodge Data & Analytics
				Monthly Construction Starts
				Seasonally Adjusted Annual Rates, in Millions of Dollars
				February 2019			January 2019			% Change
Nonresidential Building				$244,481			$244,744			-0-
Residential Building				299,350			310,122			-3
Nonbuilding Construction				153,583			167,430			-8
Total Construction				$697,414			$722,296			-3
				The Dodge Index
				Year 2000=100, Seasonally Adjusted
				February 2019.....148
				January 2019…...153
				Year-to-Date Construction Starts
				Unadjusted Totals, in Millions of Dollars
				2 Mos. 2019			2 Mos. 2018			% Change
Nonresidential Building				$33,474			$38,579			-13
Residential Building				42,543			49,868			-15
Nonbuilding Construction				23,235			24,723			-6
Total Construction				$99,252			$113,170			-12

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View source version on businesswire.com: https://www.businesswire.com/news/home/20190321005417/en/

Source: Business Wire
(March 21, 2019 - 9:35 AM EDT)

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