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Forecasts & Trends
October Construction Advances 2%
going over blueprints

New York, N.Y. – November 19, 2010 – The value of new construction starts edged up 2% in October to a seasonally adjusted annual rate of $413.8 billion, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Much of the upward push was provided by nonbuilding construction, comprised of public works and electric utilities, with an added lift coming from modest growth for housing.  However, nonresidential building in October retreated following its improved contracting in September.  Through the first ten months of 2010, total construction on an unadjusted basis came in at $350.4 billion, down 3% from a year ago.

The October data produced a reading of 88 for the Dodge Index (2000=100), up from September’s 86.  Over the course of 2010, the Dodge Index has hovered between 82 and 94.  “This year’s pattern shows activity fluctuating within a set range, consistent with the belief that construction starts have now stabilized at a low level,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “At the same time, there’s yet to be evidence that renewed expansion on a sustained basis is about to take hold.  The emerging recovery for housing has proven to be halting, and commercial building is still in the process of bottoming out.  While public works in 2010 has moved at a decent clip, its prospects for 2011 are less favorable, given fading stimulus support and the fact that Congress has yet to pass the appropriations bills for fiscal 2011.”

Nonbuilding construction in October increased 14% to $145.8 billion (annual rate), making a partial rebound after the 27% decline reported for September.  Electric utility construction was particularly strong in October, climbing 31%, helped by the start of five large wind power projects located in Ohio ($700 million), South Dakota ($363 million), Nebraska ($200 million), Utah ($153 million), and Washington state ($150 million).  Also contributing was a $700 million modification to a coal-fired power plant in Alabama, as well as a $510 million power line project in Nevada.  For the public works side of nonbuilding construction, the “miscellaneous” public works category jumped 44% in October, boosted by the start of large rail-related projects in New York ($343 million) and Utah ($191 million).  Substantial gains were also reported in October for sewers and hazardous waste work (up 58%), as well as river/harbor development (up 22%), but water supply systems weakened (down 17%).  Highway construction in October was unchanged from September, while bridge construction retreated 18%.

Residential building, at $120.1 billion (annual rate), improved 3% in October.  Leading the way was a 10% advance for multifamily housing, which rose for the second straight month after losing momentum at midyear.  Large multifamily projects that contributed to October’s gain were a $99 million condominium project in San Francisco CA, a $52 million mixed-use project in Marina Del Rey CA, and a $42 million apartment project in Washington DC.  Through the first ten months of 2001, multifamily housing was up 4% in dollar volume compared to last year, with noteworthy increases in such metropolitan areas as San Francisco CA (up 101%), Boston MA (up 75%), Los Angeles CA (up 31%), and Washington DC (up 8%).  Single family housing in October edged up 1%, providing more evidence that it has leveled off after the pullback reported during the second quarter.  Through the first ten months of 2010, single family housing held onto a 9% gain over last year, reflecting this performance by region – the Northeast, up 13%; the South Atlantic, up 12%; the Midwest and West, each up 9%; and the South Central, up 3%.

Nonresidential building in October fell 9% to $147.8 billion (annual rate).  Several structure types which had experienced large gains in September pulled back in October.  Office construction dropped 47%, after a 26% increase in September which included the start of a $290 million corporate headquarters.  The largest office project reported as an October start was a $35 million federal government office building in Phoenix AZ.  The manufacturing plant category in October dropped 60%, after a 70% increase in September that included $1.6 billion for the resumption of work on an oil refinery in Port Arthur TX.  October did see a few large manufacturing projects reach groundbreaking, including the start of a $325 million steel pipe mill in Youngstown OH.  Transportation terminal work in October dropped 50%, after a 75% increase in September that included a $300 million airline terminal project.  Other nonresidential categories that reported diminished activity in October were dormitories, down 9%; stores and shopping centers, down 6%; and amusement-related facilities, down 4%.  Warehouse construction in October was unchanged from the previous month.

On the plus side, educational facilities climbed 26% in October, in a departure from the generally downward trend that has been present during 2010.  Large projects that helped to lift the educational category in October included a $156 million neuroscience research building in Bethesda MD, a $100 million school of medicine in Richmond VA, and a $60 million high school in Natick MA.  Healthcare facilities in October climbed 7%, boosted by the $381 million expansion to a university hospital in Columbus OH and a $90 million hospital in Goldsboro NC.  Other institutional categories posting gains in October were public buildings, up 9%; and religious buildings, up 51%; with both rising from weak September amounts.  The depressed hotel category also registered a gain in October from a weak September, climbing 43% with support coming from groundbreaking for a $96 million hotel in Columbus OH.

The 3% slide for total construction on an unadjusted basis during the January-October period of 2010 was due to a mixed performance by major sector.  Nonresidential building dropped 12% year-to-date, with commercial building down 21%, manufacturing building down 18%, and institutional building down 8%.  Nonbuilding construction during the first ten months of 2010 slipped 2%, with public works down 2% and electric utilities down 1%.  Residential building continued to be the one major sector able to show year-to-date growth, climbing 8%.  By geography, total construction during the January-October period of 2010 showed an increase for one region – the Northeast, up 5%.  Total construction in the Midwest was unchanged from a year ago, while total construction declines were registered by the South Central, down 4%; the West, down 5%; and the South Atlantic, down 11%.

October 2010 Construction Starts


 

OCTOBER 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

  October 2010 September 2010 % Change
 Nonresidential Building $147,809 $162,005 -9
 Residential Building 120,125 116,650 +3
 Nonbuilding Construction  145,841  127,906  +14
 Total Construction $413,775 $406,561 +2

 

The Dodge Index
(2000=100, Seasonally Adjusted)

October 2010.........................................88
September 2010...................................86

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

  10 Mo. 2010 10 Mo. 2009 % Change
 Nonresidential Building $129,011 $146,617 -12
 Residential Building 102,019 94,567 +8
 Nonbuilding Construction  119,326  121,818  -2
 Total Construction $350,356 $363,002 -3

 

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