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Forecasts & Trends
November Construction Slides 11%
going over blueprints

New York, N.Y. – December 21, 2011 – At a seasonally adjusted annual rate of $417.6 billion, new construction starts in November dropped 11% from October’s elevated pace, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Nonresidential building retreated after being boosted in October by the start of a massive manufacturing plant, and nonbuilding construction showed electric utilities pulling back from the brisk pace of recent months.  Meanwhile, residential building in November registered moderate growth, helped by further strengthening for multifamily housing.  During the first eleven months of 2011, total construction on an unadjusted basis was reported at $390.5 billion, down 2% from the same period a year ago.

The November statistics lowered the Dodge Index to 88 (2000=100), compared to the reading of 99 for October.  For the January-November period of 2011, the Dodge Index averaged 90, essentially the same as its full year average of 91 in 2010 and 90 in 2009.  “The strong volume in October, with total construction starts climbing 12%, was not likely to be sustained given the fact that much of the lift came from the start of several unusually large projects,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “In November, activity returned close to its average pace so far in 2011, which is essentially the same as what was being reported during the previous two years.  The picture for construction starts in a broad sense continues to be stability at a low level, with renewed expansion not yet taking hold. By individual project types, however, there has been a varied pattern during 2011.  Year-to-date gains have been reported for multifamily housing, manufacturing plants, electric power plants, and even some commercial building types, but this has been offset by further weakening for single family housing, institutional building, and public works.”

Nonresidential building in November fell 20% to $142.4 billion (annual rate), following its 36% surge in the previous month.  The largest decline was reported for the manufacturing plant category, which plunged 72% from October which included $3.0 billion for work on the Adam’s Fork coal-to-gasoline facility in West Virginia.  If the Adam’s Fork project is excluded from the October statistics, then the manufacturing plant category in November would be up 140%, nonresidential building would be steady, and total construction would be down a more moderate 4%.  The manufacturing plant category in November did feature several large projects, such as a $500 million pipe manufacturing plant in Texas, although not to the same extent as what took place in October.  For commercial building, office construction in November retreated 26% from October, which had been supported by the start of a $285 million office building in New York NY.  At the same time, the office category in November did include the start of such projects as a $150 million renovation of a corporate headquarters in Plainsboro NJ and a $79 million FBI office building in San Diego CA.  Stores and warehouses weakened in November, with respective declines of 9% and 16%, while hotel construction was flat.

The institutional categories showed mixed behavior in November. Healthcare facilities jumped 41%, aided by the November start of a $613 million replacement hospital for the Veterans Administration in Aurora CO and a $200 million hospital addition in Fullerton CA.  The educational building category, down just 1%, was essentially steady in November, and was helped by the start of two university-related science buildings – a $254 million facility in Washington DC and a $185 million facility in Portland OR.  The smaller institutional categories in November reported decreased activity, with churches down 27%; transportation terminals down 31%; recreation-related projects down 33%; and public buildings, down 38%.

For the first eleven months of 2011, nonresidential building came in 4% below a year ago.  The institutional sector fell 12%, with weaker activity for educational buildings, down 12%; churches, down 15%; recreation-related projects, down 20%; public buildings, down 21%; and transportation terminals, down 26%.  Healthcare facilities during the first eleven months of 2011 rose 4%, running counter to the downward trend for the other institutional project types.  Commercial building during the first eleven months of 2011 increased 6%, helped by gains for hotels, up 43%; and warehouses, up 10%; while only slight declines were reported for stores, down 1%; and offices, down 2%.  The manufacturing plant category in the first eleven months of 2011 jumped 51%, helped by the start of several very large projects over the course of the year.

Nonbuilding construction, at $137.0 billion (annual rate) in November, dropped 14% from the previous month.  The electric utility category retreated 34% from its exceptional October amount, although the pace in November was still quite high by recent standards – 34% above the average monthly rate during 2010.  The noteworthy electric utility projects in November were $1.0 billion for work on a nuclear facility in South Carolina, $1.0 billion for a solar farm in California, and $300 million for a wind farm in Iowa.  For the public works categories, steep declines in November were reported for water supply systems, down 25%; and sewers, down 43%, while river/harbor development managed to rise 24% from a lackluster October.  Highway construction in November slipped 4%, although bridge construction climbed 29%, reflecting the start of a $587 million bridge project in the state of Washington.  The “miscellaneous” public works category, which includes such diverse project types as site work, mass transit, pipelines, and outdoor sports stadiums, grew 11% in November with the help of a $250 million upgrade to a football stadium in the state of Washington.

During the January-November period of 2011, nonbuilding construction was down 2% from the same period a year ago.  For transportation-related public works, highways slipped 3% year-to-date while bridge construction fell 15%.  For the environmental public works categories, declines were reported for river/harbor development, down 2%; sewer construction, down 7%; and water supply construction, down 17%.  The “miscellaneous” public works category plunged 47% year-to-date, due to a sharply reduced amount of new pipeline starts.  On the plus side, electric utility construction has soared during 2011, climbing 72% year-to-date, and has already achieved a new annual high in current dollar terms.

Residential building in November advanced 4% to $138.2 billion (annual rate).  Like recent months, multifamily housing provided the upward momentum, rising 25%.  Large multifamily projects that reached groundbreaking in November included a $173 million apartment building in San Francisco CA and a $150 million apartment building in New York NY, as the push continues to come from apartment projects (as opposed to condominiums).  Single family housing in November retreated 1%, settling back after the modest improvement of the previous month, as this category continues to struggle to achieve any upward traction.

During the first eleven months of 2011, residential building was reported to be steady with its dollar amount for the same period a year ago.  Multifamily housing was up 17%, as the result of this year-to-date performance by geography – the West, up 33%; the South Atlantic, up 27%; the Northeast, up 19%; the South Central, up 10%; and the Midwest, down 1%.  The top five metropolitan areas in terms of the dollar amount of multifamily starts were – New York NY, up 26%; Washington DC, up 56%; Boston MA, up 35%; Dallas-Ft. Worth TX, up 140%; and Chicago IL, up 20%.  The large percentage increase for multifamily housing in the West was helped by gains in such metropolitan areas as Seattle WA, up 139%; Los Angeles CA, up 61%; and San Francisco CA, up 41%.  Single family housing in the January-November period of 2011 was down 3%, as the result of this performance by geography – the South Atlantic, up 1%; the South Central, down 2%; the West, down 3%; the Midwest, down 6%; and the Northeast, down 12%.

The 2% decline for total construction starts at the national level during the first eleven months of 2011 was reflected in a mixed performance at the five region level.  Year-to-date declines for total construction were shown by three regions – the South Central, down 4%; the Northeast, down 11%; and the Midwest, down 12%. Year-to-date gains were shown by two regions – the South Atlantic, up 5%; and the West, up 10%, with particularly large increases for new electric utility starts helping the total construction amount for each region.

 

NOVEMBER 2011 CONSTRUCTION STARTS

 

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

Seasonally Adjusted Annual Rates, In Millions of Dollars

November 2011 October 2011 % Change

Nonresidential Building

$142,400

$177,942

-20

Residential Building

138,248

132,353

+4

Nonbuilding Construction

 136,964

 159,434

-14

Total Construction

$417,612

$469,729

-11

 

The Dodge Index
(2000=100, Seasonally Adjusted)

November 2011 .......................................... 88
October 2011 ............................................... 99

 

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

11 Mos. 2011 11 Mos. 2010 % Change

Nonresidential Building

$143,813

$149,580

 -4

Residential Building

 112,651

 112,181

 -0-

Nonbuilding Construction

 134,016

 136,472

 -2

Total Construction  

$390,480

$398,233

-2

 

About McGraw-Hill Construction
McGraw-Hill Construction connects people, projects, and products across the construction industry. For more than a century, it has remained North America’s leading provider of project and product information, plans and specifications, and industry news, trends and forecasts. McGraw-Hill Construction serves more than one million customers in the global construction industry through Dodge, Sweets, Architectural Record, Engineering News-Record, GreenSource, and SNAP. To learn more, visit www.construction.com or follow @mhconstruction on Twitter.

About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies is a leading global financial information and education company that helps professionals and students succeed in the knowledge economy. Leading brands include Standard and Poor’s, McGraw-Hill Education, Platts energy information services, and J.D. Power and Associates. The Corporation has approximately 21,000 employees with more than 280 offices in 40 countries. Sales in 2010 were $6.2 billion. Additional information is available at www.mcgraw-hill.com.

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