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Forecasts & Trends
April Construction Unchanged From Prior Month
going over blueprints

New York, N.Y. – May 18, 2011 – New construction starts in April were reported at a seasonally adjusted annual rate of $400.2 billion, basically the same amount as March, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Nonresidential building slipped back after its elevated March pace, while nonbuilding construction (public works and electric utilities) continued to retreat.  In contrast, residential building in April registered a moderate gain, helped by upward movement for multifamily housing.  During the first four months of 2011, total construction on an unadjusted basis came in at $122.1 billion, down 9% from the same period of 2010.

The April data produced a reading of 85 for the Dodge Index (2000=100), unchanged from the revised level for March and also February.  “The pattern of construction starts has been essentially flat within a broad range for about two years now, and the past three months have come in towards the lower end of that range,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “There have been a few positive signs in recent months, such as the strengthening trend shown by multifamily housing and the pickup for manufacturing plants.  However, single family housing remains stalled, and the tough fiscal environment continues to dampen the prospects for institutional building and public works, even with the occasional support coming from large projects such as took place during April.  More and more, it’s looking like the best that can be expected this year for the overall level of construction starts is flat activity.”

Nonresidential building in April dropped 2% to $160.2 billion (annual rate), down slightly after the 26% gain reported for March.  Much of April’s decreased contracting came from the commercial and industrial structure types, which had been boosted in March by the start of several very large projects.  Office construction in April dropped 55%, after being lifted in March by the start of a $1.1 billion data center for the National Security Agency in Utah.  While down substantially, the office category in April did include the start of a $126 million corporate headquarters in Akron OH as well as the $125 million office portion of the $420 million City Center mixed use project in Washington DC.  The manufacturing plant category in April was also down substantially, falling 59% from March which included the start of a $900 million semiconductor plant in Oregon.  Both stores and warehouses posted large April declines, sliding 22% and 30%, respectively.  Running counter to the generally downward trend for commercial building in April was hotel construction, which jumped 91%.  Large hotel projects that reached groundbreaking in April included a $127 million hotel in New York NY and a $108 million hotel in Bloomington MN.

The institutional side of the nonresidential market in April was mixed.  The largest gain was registered by transportation terminal work, soaring 287% with the support of several large projects.  These included a $1.2 billion airport terminal renovation and expansion at JFK International Airport in New York NY, a $580 million train and bus terminal in San Francisco CA, and a $135 million airport terminal expansion in Philadelphia PA.  Healthcare facilities in April strengthened after a sluggish March, climbing 24% with the push arising from such large projects as a $470 million medical center in San Antonio TX and a $175 million hospital in Jonesboro AR.  The educational building category in April improved 3%, helped by a $103 million expansion to a medical research facility in Madison WI, a $65 million expansion to an art museum in Queens NY, and a $64 million expansion and renovation to a high school in Massachusetts.  The other institutional categories in April showed reduced activity, with amusement-related projects down 5%, public buildings down 10%, and churches down 11%.

Nonbuilding construction, at $116.5 billion (annual rate), dropped 3% in April.  Much of the downward pull came from a slower pace for electric utilities, which fell 31% from March, as this category continued to retreat from its exceptional February amount.  While not as brisk as the previous two months, electric utilities did see the start of several large projects in April, including a $550 million natural gas-fired power plant in California and a $425 million wood-fired biomass power plant in Florida.  For the public works categories, April showed improved activity for sewer systems which advanced 86%, reflecting the start of a $164 million waste water treatment system at Camp Pendleton CA.  Highway and bridge construction in April climbed 5%, aided by the start of a $357 million reconstruction project on I-95 in New Haven CT.  The miscellaneous public works category, which includes diverse project types, rose 10% in April with help from the start of a $150 million automotive racetrack in Austin TX.  On the negative side, April showed slower contracting for water supply systems, down 4%; and river/harbor development, down 32%.

Residential building in April grew 4% to $123.5 billion (annual rate).  Multifamily housing in April climbed 43%, continuing the up-and-down pattern around a rising trend that has been present since late 2010 and into early 2011.  The largest multifamily project reported as an April start was the $180 million apartment/condominium portion of the $420 million City Center mixed use project in Washington DC.  Additional support in April came from numerous projects of more moderate scale, including 15 multifamily projects with a construction start cost in the range of $25 million to $65 million.  Single family housing in April continued to languish, slipping an additional 4%.  While single family housing seemed to show improvement towards the end of 2010, activity so far in 2011 has generally trended downward.  By region, April revealed this performance for single family housing – the South Central, down 9%; the Northeast, down 7%; the West, down 2%; the South Atlantic, down 1%; and the Midwest, up 3%.  Murray noted, “Single family housing has been negatively affected by continued uncertainty about the near-term prospects for the economy, as well as by falling home prices which have further diminished the investment component of homebuyer demand.”

The 9% decline for total construction on an unadjusted basis for the first four months of 2011 compared to last year was the result of weaker activity for all three main sectors.  Nonresidential building dropped 7% year-to-date, due to this behavior – commercial building, up 19%; manufacturing building, up 209%; and institutional building, down 23%.  Nonbuilding construction was down 5% year-to-date, with the public works categories sliding 25% while electric utility work climbed 154%.  Residential building showed the largest year-to-date decline of the three main sectors, falling 15%, with the comparison to the early months of 2010 when housing activity was recovering prior to its midyear stall.  By geography, total construction in the first four months of 2011 registered this pattern – the South Atlantic, down 19%; the Northeast, down 13%; the Midwest, down 11%; the South Central, down 2%, and the West, no change.

Additional perspective comes from looking at twelve-month moving totals, in this case the twelve months ending April 2011 versus the twelve months ending April 2010.  On this basis, total construction is down 5%, as the result of this performance by sector – nonresidential building, down 5%; residential building, down 7%; and nonbuilding construction, down 2%.  By region, the twelve months ending April 2011 showed the following for total construction compared to the previous twelve months – the South Atlantic, down 16%; the Northeast, down 6%; the South Central, down 4%; the Midwest, no change; and the West, up 2%.

APRIL 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

  April 2011 March 2011 % Change
 Nonresidential Building $160,198 $163,336 -2
 Residential Building 123,507 118,371 +4
 Nonbuilding Construction  116,456  119,905  -3
 Total Construction $400,161 $401,612 -0-

 

The Dodge Index
(2000=100, Seasonally Adjusted)

April 2011..............................................85
March 2011...........................................85

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

  4 Mo. 2011 4 Mo. 2010 % Change
 Nonresidential Building $44,749 $47,953 -7
 Residential Building 35,608 41,795 -15
 Nonbuilding Construction  41,724  43,694  -5
 Total Construction $122,081 $133,442 -9

 

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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