August Construction Rises 2 Percent

NEW YORK, Sept. 20, 2013 — (PRNewswire) — At a seasonally adjusted annual rate of $490.2 billion, new construction starts in August advanced 2% relative to July, it was reported by McGraw Hill Construction, a division of McGraw Hill Financial.  Residential building stayed on the upward track, and nonbuilding construction (public works and electric utilities) rebounded after its loss of momentum in July.  At the same time, nonresidential building retreated from its improved July amount, continuing the up-and-down pattern that's been present during 2013.  For the first eight months of 2013, total construction starts on an unadjusted basis came in at $329.4 billion, up 1% from the same period a year ago.  If electric utilities are excluded from the year-to-date statistics, total construction starts in the first eight months of 2013 would be up 10%.

The August data lifted the Dodge Index to 104 (2000=100), compared to a revised 102 for July.  So far during 2013, the Dodge Index has hovered within the range of 98 to 106, after averaging 103 for the full year 2012.  "On balance, the construction industry is showing modest growth in 2013, although by major sector there's been divergent behavior," stated Robert A. Murray, vice president of economic affairs for McGraw Hill Construction.  "Housing continues to lead the way, with consistent gains reported for both single and multifamily housing. Public works has edged up slightly from last year, helped by the start of several very large projects and withstanding for now the negative impact of the sequester.  New electric utility starts have fallen substantially from last year's record volume.  However, it's been more problematic to discern this year's trend for nonresidential building – the commercial categories are hesitantly picking up the pace, but the institutional categories are still languishing.  A more solid expansion for total construction requires a greater contribution from nonresidential building, which has yet to occur."

Residential building in August increased 4% to $214.1 billion (annual rate).  Single family housing grew 2%, maintaining the steady growth that's been present during 2013.  While the month-to-month increases have been smaller than last year, the consistent gains have enabled the pace for single family housing in August to be 11% higher than the start of this year, and 30% higher than the average monthly pace reported during 2012.  By geography, single family housing in August revealed this pattern – the Midwest, up 4%; the South Atlantic and Northeast, each up 3%; the West, up 2%; and the South Central, down 1%.  Since May, the 30-year fixed mortgage rate has moved up from 3.5% to 4.5%, but this increase in the cost of financing has not had much if any negative impact on homebuyer demand and single family construction.  Multifamily housing in August jumped 12%, achieving the second highest monthly amount so far in 2013.  Large multifamily projects that reached groundbreaking in August included a $110 million apartment building in Cambridge MA, two apartment buildings in Brooklyn NY valued at $105 million and $103 million respectively, and a $103 million apartment building in Boston MA.  The top five metropolitan areas for multifamily starts in August were New York NY, Boston MA, Miami FL, San Francisco CA, and Los Angeles CA.

Nonbuilding construction, at $127.3 billion (annual rate), climbed 11% in August.  Highway and bridge construction had a strong month, jumping 30%.  Large projects that lifted the highway and bridge total in August were the $798 million Horseshoe Project in Dallas TX, involving replacement of bridges over the Trinity River and road upgrades, and the $743 million Bayonne Bridge project in Bayonne NJ, involving raising the bridge roadway from 151 feet above the water to approximately 215 feet.  The top five states for new highway and bridge construction starts in August were Texas, New Jersey, New York, California, and Illinois.  The miscellaneous public works category, which includes such project types as pipelines and mass transit, increased 6% in August. Large projects that supported the miscellaneous public works total were a $300 million shale pipeline in Texas and a $133 million rail tunnel for Amtrak under the Hudson Yards site in New York.  The remaining public works categories retreated in August from the previous month.  River/harbor development slipped 5%, although August did include $148 million for site work in advance of the upcoming Tappan Zee Bridge replacement in New York.  Water supply construction in August decreased 10%, while new sewer projects dropped 16%.  Electric utility construction in August fell an additional 5%, continuing this year's sharply lower amount of construction starts relative to 2012.  The largest electric utility project in August was a $327 million wind farm in Texas.

Nonresidential building in August dropped 8% to $148.9 billion (annual rate), falling back after a 9% gain in July.  Much of the downturn came from the institutional categories, which fell a combined 16%.  Healthcare facilities pulled back 44% after showing improved activity in July, as construction is being restrained by several factors, including uncertainty related to the implementation of the Affordable Care Act and a greater number of hospital mergers.  The largest hospital project that reached groundbreaking in August was a $118 million hospital in Shiloh IL, followed by a $66 million addition to a medical center in Plano TX.  Education-related construction in August dropped 5%, also after showing improved activity in July.  There were several large high school construction projects that reached groundbreaking in August, including a $100 million high school in Haslet TX and a $62 million high school in Guilford CT, but these were not enough to avert a decline for the overall category.  Most of the smaller institutional categories showed reduced contracting in August.  Transportation terminal work dropped 50% from its heightened July amount, although August did include $157 million for a passenger rail station reconstruction in Harrison NJ.  The public buildings category in August retreated 35%, while church construction stayed depressed with a 14% decline.  Amusement and recreational work ran counter to the generally downward movement for institutional building in August, climbing 57%.  Large projects that helped to lift the amusement total were the $126 million Harrah's Resort Meeting Facility in Atlantic City NJ, a $101 million addition to the Hard Rock Casino and Hotel in Sioux City IA, and a $100 million renovation to the Inglewood Forum in Inglewood CA.

The commercial categories in August grew a combined 3%.  Office construction increased 10%, lifted by the August start of several large projects – the $500 million Facebook data center in Altoona IA, a $100 million addition/renovation to an office building in Rockville MD, and a $91 million biomedical office building in New Haven CT.  Hotel construction in August climbed 23%, rebounding from a weak July with the boost coming from groundbreaking for a $95 million hotel resort in Hollywood FL.  Warehouse construction in August advanced 3%, but store construction fell back 9%, despite the start of an $85 million regional shopping center in northern Virginia.  The manufacturing plant category in August grew 21% after a weak July, helped by the start of a $138 million chemical plant in Louisiana and a $130 million ethanol plant in North Dakota .

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