New York, N.Y. – July 22, 2011 – New construction starts in June climbed 15% to a seasonally adjusted annual rate of $436.8 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The gain followed particularly weak activity in May, and helped the pace of contracting during this year’s second quarter stay close to its first quarter level. June featured a substantial increase for the nonbuilding construction sector, led by the start of several large electric utility projects. Nonresidential building also registered improvement in June, while housing edged up slightly. During the first six months of 2011, total construction starts on an unadjusted basis came in at $198.2 billion, down 7% from the same period a year ago.
The June data lifted the Dodge Index to 92 (2000=100), which is the highest reading so far in 2011. During the first five months of 2011, the Dodge Index had trended downward, moving from 91 in January to 80 in May. “The pattern of construction starts during the early months of 2011 showed a loss of momentum, due largely to renewed weakness for single family housing combined with a pullback for public works and institutional building,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “June’s gain enables the average for this year’s second quarter to be down a modest 2% from the first quarter, a milder slowdown than what was being suggested by the data through May. The overall level of construction continues to be weak, but June’s gain is consistent with the sense that construction activity is hovering at a low level, rather than seeing further sustained declines.”
Nonbuilding construction in June soared 34% to $163.2 billion (annual rate). The lift came from the electric utility category, which advanced 103% in June as it continued to see a robust volume of projects reach the construction start stage. June included the start of a massive $1.3 billion transmission line project in Maine, as well as a $710 million transmission line project in New Jersey. Other large electric utility projects reported as June starts included two gas-fired power plants, located in North Carolina ($900 million) and California ($440 million), as well as two large wind power facilities, located in Kansas ($350 million) and Texas ($338 million). The public works sector in June registered a smaller 2% gain, reflecting a mixed pattern by project type. Highways and bridges climbed 9% in June, making a partial rebound after May’s depressed amount, although remaining below the elevated pace witnessed during 2010 and early 2011. Sewer construction in June grew 4%, helped by the start of a $94 million waste water treatment plant in New Rochelle NY. The miscellaneous public works category increased 14%, boosted by the start of airport runway work in Chicago and Boston. Decreased activity in June was reported for water supply systems, down 8%; and river/harbor development, down 34%.
For the first six months of 2011, nonbuilding construction slipped 1% from last year, due to divergent behavior for electric utilities and public works. The electric utility category jumped 164% year-to-date, and is on track to set a new high for construction starts in current dollar terms. In contrast, public works construction is down 25% year-to-date, as the result of decreased federal and state spending, as well as the comparison to the first half of 2010 that saw substantial federal stimulus support for public works projects.
Nonresidential building, at $153.6 billion (annual rate), climbed 11% in June. The commercial categories showed healthy percentage gains, moving up from May’s weak activity. Office construction in June rose 39%, boosted by the start of a $160 million corporate campus in the Houston (TX) metropolitan area, as well as by the start of a $147 million federal building renovation at Fort Snelling MN and a $60 million renovation to a corporate headquarters in Seattle WA. Hotel construction jumped 55%, moving up from a particularly depressed May, and helped by the start of a $50 million hotel renovation in Philadelphia PA. Warehouse construction in June increased 30%, aided by the start of a $75 million distribution center for Amazon.com in South Carolina, while store construction improved 11%. The manufacturing plant category, which had been seeing an elevated pace of activity for much of 2011, settled back 13% in June.
On the institutional side of the nonresidential market, healthcare facilities in June rose 16%, continuing to strengthen after the sluggish activity earlier in 2011. June included groundbreaking for a $412 million medical center in Dallas TX and a $316 million naval hospital at Camp Pendleton CA, as well as four other hospital projects valued at $100 million or greater. The amusement-related category increased 90% in June, aided by the $122 million addition to a performing arts center in San Antonio TX, as well as two large casino development projects in Ohio. The public buildings category, which has fallen sharply over the past year, bounced back 89% in June, reflecting the start of a $250 million courthouse building in Long Beach CA. Educational facilities, the largest institutional category, improved a moderate 4% in June. Institutional structure types with June declines were church construction, down 34%; and transportation terminals, down 77%. The steep drop for transportation terminal work followed heightened levels of activity during April and May.
During the first six months of 2011, nonresidential building was down 9% from a year ago, as the institutional building sector fell 20%. In contrast, commercial building year-to-date climbed 11%, beginning to gain some upward momentum after last year’s very weak volume. The manufacturing plant category year-to-date increased 98%, aided by the start of several large manufacturing plants that reached groundbreaking during the first half of this year.
Residential building in June grew 1% to $120.1 billion (annual rate). The upward push was provided by multifamily housing, which increased 8% after retreating in May. Large multifamily projects that reached groundbreaking in June included a $123 million apartment building in Seattle WA and a $114 million apartment building in Chicago IL. During the first half of 2011, the top five metropolitan areas in terms of the dollar amount of new multifamily projects were: New York, Washington DC, Chicago, Boston, and Seattle. Single family housing in June was unchanged from May, as the result of a varied pattern by region – the Midwest, up 3%; the South Central, up 2%; the Northeast, up 1%; the South Atlantic, down 1%; and the West, down 5%. Murray noted, “While single family housing in June held steady with May, it was still down 3% from its average for all of 2010, and is headed for a year-over-year decline in 2011 after its modest 2010 increase.”
At the six-month mark of 2011, residential building dropped 10% from the first half of 2010, with declines reported for single family housing, down 10%; and multifamily housing, down 6%. The multifamily decline in dollar terms is related to the fact that last year’s first half included several large multifamily renovation projects. At the same time, multifamily housing in dwelling unit terms during the first half of 2011 was up 5% compared to last year.
The 7% shortfall for total construction starts at the U.S. level during the first six months of 2011 relative to 2010 was due to declines in four of the five major regions – the Midwest, down 12%; the Northeast and South Atlantic, each down 10%; and the South Central, down 9%. The West was the one region to report a year-to-date gain, rising 7% with much of the upward push coming from a strong volume of electric utility projects.
JUNE 2011 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
|June 2011||May 2011||% Change|
The Dodge Index
(2000=100, Seasonally Adjusted)
YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars
|6 Mo. 2011||6 Mo. 2010||% Change|
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.