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Forecasts & Trends
November Construction Slides 9%
going over blueprints

New York, N.Y. – December 21, 2010 – At a seasonally adjusted annual rate of $375.9 billion, new construction starts in November fell 9% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Nonresidential building weakened for the second month in a row, while nonbuilding construction (public works and electric utilities) retreated after its elevated pace in October.  Meanwhile, residential building in November showed modest growth.  For the first eleven months of 2010, total construction on an unadjusted basis was reported at $378.7 billion, down 4% from the corresponding period of 2009.

November’s data lowered the Dodge Index to 80 (2000=100), after October’s reading of 88.  “Since early 2009, the construction start statistics have shown an up-and-down pattern, essentially leveling off within a set range following an extended three-year decline,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “The pullback in November after October’s slight gain shows that this up-and-down pattern continues, and there’s yet to be evidence that renewed expansion is taking hold.  For nonresidential building, the worst of the decline for the commercial structure types has run its course, but the volume of activity remains very weak.  The housing sector, after losing momentum during the spring, appears to be edging upward once again, but to this point the pickup has been meager.  For the public works sector, this year’s growth for transportation-related work has been offset by weaker activity for the environmental project types.  In the near term, the overall economy may be helped by the recent extension of the federal tax cuts, but going into 2011 the construction industry will still face several constraints.  These include: restrictive bank lending standards which have yet to ease, fading stimulus support, and further erosion in the fiscal health of states and localities.”

Nonresidential building in November dropped 12% to $130.1 billion (annual rate), falling back for the second straight month after improved activity was reported in September.  The educational building category, which is the largest nonresidential project type, plunged 23% in November.  Even though November included the start of a $500 million police academy building in the College Point section of New York NY, it was not enough to outweigh diminished activity for this category’s other segments, such as K-12 school buildings.  Other institutional building categories with large percentage declines in November were amusement-related projects, down 44%; churches, down 29%; and transportation terminals, down 14%.  The public building category in November featured groundbreaking for two large federal courthouses, located in Salt Lake City UT ($175 million) and Billings MT ($58 million), but the category as a whole slipped 8% as military-related work continued to recede.  Healthcare facilities in November held steady with the prior month, and included the start of a $143 million rehabilitation hospital in Charlestown MA and a $125 million psychiatric facility in New Hyde Park NY.

Several commercial categories showed growth in November, although their volume of activity remains very weak.  Office construction grew 24%, and included the start of a $120 million renovation to a federal office building in Portland OR.  Warehouse construction in November advanced 19%, while hotels increased 15% with the help of a $36 million hotel renovation project in New York NY.  Store construction in November decreased 7%.  The manufacturing plant category in November moved up 3%, with the lift coming from a $300 million steel manufacturing plant in Minnesota.

For the first eleven months of 2010, nonresidential building was down 12% from a year ago.  The commercial sector fell 20%, as the result of these declines – stores, down 8%; warehouses, down 22%; offices, down 29%; and hotels, down 32%.  The manufacturing plant category in the January-November period dropped 12%.  The institutional sector was down 8% year-to-date, with weaker activity for educational buildings, down 7%; and public buildings, down 38%.  Healthcare facilities were unchanged year-to-date, while transportation terminals increased 17%.

Nonbuilding construction, at $123.0 billion (annual rate), fell 16% in November after a 14% gain in October.  Much of November’s nonbuilding decline was related to a 56% drop for electric utility construction, following an exceptionally strong amount in October.  While not as robust as October, the electric utility category in November did see the start of several large projects, including a $250 million gas-fired power plant in Idaho, a $215 million solar energy plant in Colorado, a $100 million transmission line in Rhode Island, a $100 million wind farm in Maine, and an $85 million biomass power plant in Oregon.  The public works sector in November showed large declines for sewer systems, down 19%; and water supply systems, down 23%.  The “miscellaneous” public works category (which includes site work, pipelines, and mass transit) was unchanged in November, and featured a $425 million natural gas pipeline in the states of Arizona and Nevada, plus a $119 million modernization to a rail signal system in New York.  On the positive side, highway construction in November grew 6%, aided by the start of a $91 million project in Texas, while bridge construction advanced 9%.  River/harbor development in November jumped 20%, with the lift coming from a $265 million storm sewer project in Ohio.

During the January-November period of 2010, nonbuilding construction came in 2% below the same period a year ago.  Year-to-date declines were reported for the environmental project types – water supply systems, down 2%; sewer systems, down 7%; and river/harbor development, down 17%.  In addition, the “miscellaneous” public works category retreated 5%.  Highways and bridges have seen further growth in 2010, with year-to-date gains of 2% and 4%, respectively.  The electric utility category in this year’s first eleven months increased 2%.

Residential building in November advanced 3% to $122.8 billion (annual rate).  Single family housing grew 4%, maintaining the very gradual upward movement that’s been present since August, after activity dropped back in late spring.  The November pace for single family housing was still 13% below its average for this year’s first quarter, when a more solid recovery for single family housing seemed to be taking hold.  Multifamily housing in November slipped 4%, retreating moderately after its improved activity in September and October.  Large multifamily projects that reached groundbreaking in November included a $67 million retirement complex in Chicago IL, a $53 million apartment building in New York NY, and a $43 million apartment renovation in Boston MA.

During the first eleven months of 2010, residential building came in 7% above its dollar amount for the same period a year ago.  Single family housing was up 7% year-to-date, as the result of this performance by geography – the Northeast, up 11%; the South Atlantic, up 10%; the Midwest, up 8%; the West, up 7%; and the South Central, up 2%.  Multifamily housing was up 8% year-to-date, as the result of this performance by geography – the Midwest, up 17%; the West, up 15%; the South Central, up 13%; the South Atlantic, up 8%; and the Northeast, down 6%.

The 4% decline for total construction starts at the national level during 2010’s January-November period was reflected in a varied performance at the five region level.  Year-to-reductions for total construction were shown by the West, down 3%; the South Central, down 5%; and the South Atlantic, down 10%.  Total construction in the Midwest was unchanged year-to-date, while the Northeast was able to register a 3% gain.

November 2010 Construction Starts

NOVEMBER 2010 CONSTRUCTION STARTS

MONTHLY SUMMARY OF CONSTRUCTION STARTS
Prepared by McGraw-Hill Construction Research & Analytics

Monthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of Dollars

  November 2010 October 2010 % Change
 Nonresidential Building $130,074 $148,382 -12
 Residential Building 122,820 119,444 +3
 Nonbuilding Construction  123,019  145,910  -16
 Total Construction $375,913 $413,736 -9

 

The Dodge Index
(2000=100, Seasonally Adjusted)

November 2010.........................................80
October 2010..............................................88

YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars

  11 Mo. 2010 11 Mo. 2009 % Change
 Nonresidential Building $139,315 $157,959 -12
 Residential Building 110,317 102,868 +7
 Nonbuilding Construction  129,066  131,649  -2
 Total Construction $378,698 $392,476 -4

 

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