May 22, 2012 - New York, NY
New construction starts in April advanced 11% to a seasonally adjusted annual rate of $531.3 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The increase for April followed a 23% gain in March, as contracting soared well above its lackluster pace at the outset of 2012. Much of the lift in March came from work at a nuclear power facility in Georgia, and a similar lift was provided in April by work at a nuclear power facility in South Carolina. Aside from the strength shown by electric utilities, April drew support from an improved amount of public works construction and a sizeable upturn for nonresidential building after a weak March. Also contributing to April's gain for total construction was a slight increase for residential building. During the first four months of 2012, total construction on an unadjusted basis came in at $138.2 billion, up 4% from the same period a year ago.
The latest month's data raised the Dodge Index to 112 (2000=100), compared to 102 for March. Both April and March were considerably above the full year 2011 average for the Dodge Index at 91, as well as above the depressed readings for the Index in January (85) and February (83). The April construction start statistics included $8.5 billion for work at the Virgil C. Summer nuclear power facility near Jenkinsville SC. In late March, the U.S. Nuclear Regulatory Commission approved a combined construction and operating license for Units 2 and 3, enabling construction work to begin on the two nuclear reactors. This follows more than $1.0 billion related to site work at the Summer facility that had been entered into the construction start statistics during 2011. If both the Vogtle nuclear power facility in Georgia (entered as a March 2012 start) and the Summer nuclear power facility are excluded from the March and April statistics, respectively, then total construction starts in March would be down 3% followed by a 13% increase in April. The pace of total construction starts for April without the Summer nuclear facility would be $429.3 billion (annual rate), producing a reading of 91 for the Dodge Index, the same as the average monthly pace for total construction in 2011.
"Aside from the boost coming from this year's nuclear power projects, the picture for construction starts in early 2012 is one of deterioration though March followed by some improvement in April," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "The overall level of activity continues to hover within a set range, and has not yet shifted from a hesitant up-and-down pattern to more steady expansion. On a positive note, nonresidential building in April was able to bounce back, suggesting that this sector's current status is not quite as weak as portrayed in February and March."
Nonbuilding construction in April advanced 15% to $245.6 billion (annual rate). The electric utility category was able to climb 9% on top of its exceptional March rate, as work at the Summer nuclear power facility in South Carolina matched the lift coming in March from the Vogtle nuclear power facility in Georgia. In addition, April included the start of other large electric utility projects – a $1.1 billion natural gas-fired power plant in Virginia, a $668 million waste-to-energy facility in Florida, a $375 million wind farm in Illinois, and two wind farms in Pennsylvania valued at $220 million and $210 million. For public works construction, the "miscellaneous" public works category (which includes mass transit) jumped 106% in April, led by an $877 million segment of the Eagle P3 commuter rail project in the Denver CO area. The environmental public works categories in April registered large gains, after their weak activity earlier in 2012. River/harbor development climbed 35%, helped by a $99 million dredging project on the Mississippi River in New Orleans LA. Water supply construction jumped 26%, supported by a $242 million water tunnel project in New York NY, and sewer construction grew 24%. Essentially flat in April was highway construction, up only 2%, and bridge construction, down 1%. The April amount for highway and bridge construction was 10% below the average monthly pace for these project types during 2011. Murray noted, "Highway and bridge construction continues to deal with diminished federal funding and the uncertainty created by the repeated short-term extensions of SAFETEA-LU, the multiyear transportation legislation that expired in 2009."
Nonresidential building, at $137.7 billion (annual rate), increased 14% in April. The institutional side of the nonresidential market showed some improvement after a very weak March. Healthcare facilities in April jumped 70%, aided by the start of four large projects – a $420 million medical center in La Jolla CA, a $300 million ambulatory care center in Philadelphia PA, a $234 million replacement hospital in Galveston TX, and a $114 million replacement hospital in Norfolk VA. The depressed public buildings category advanced 44% in April, helped by a $152 million police/fire station/community building in San Francisco CA and a $91 million courthouse complex in Norfolk VA. Amusement-related construction rebounded 28% from its low March amount, and church construction increased 7%. However, educational building (the largest nonresidential building category) slipped 3%, with its April amount coming in 23% below its average monthly pace during 2011. The further erosion for the educational building category came despite the April start of a $136 million high school in San Marcos CA and a $132 million museum in Miami FL.
The commercial side of the nonresidential market featured a sharp 45% increase for store construction in April, reflecting the start of a $400 million renovation of Macy's flagship department store in New York NY. Office construction retreated 4%, although April did include groundbreaking for such projects as an $80 million office building in Washington DC and a $50 million historic restoration of an office building in San Francisco CA. Warehouse construction in April dropped 13%, while hotel construction fell 36% from its elevated March pace. Even with its decline, hotel construction in April included the start of a $120 million hotel complex in Los Angeles CA. The manufacturing plant category in April climbed back 136% from an extremely depressed March, helped by such projects as a $255 million chemical plant in Westlake LA and an $85 million automotive stamping plant in Arlington TX.
Residential building in April grew 1% to $148.0 billion (annual rate). Single family housing continued to edge upward, rising 2%, and revised statistics show that it has now registered modest improvement in ten of the past twelve months. The amount of single family housing in April was up 21% relative to its average monthly pace for 2011. Multifamily housing in April settled back 1% after its 6% gain in the previous month. Large multifamily projects that reached groundbreaking in April included a $100 million addition to an apartment building in New York NY, an $89 million apartment building in Brooklyn NY, and a $75 million conversion of a hotel into a condominium building in New York NY. The amount of multifamily housing in April was up 9% relative to its average monthly pace for 2011.
The 4% gain for total construction starts on an unadjusted basis during the first four months of 2012 came as the result of large increases for two of its three major sectors. Nonbuilding construction was up 25% year-to-date, as a 103% surge for electric utilities far outweighed a 9% decline for public works. Residential building year-to-date advanced 18%, with single family housing climbing 21% while multifamily housing rose 7%. Nonresidential building was the one major sector to report a year-to-date decline, sliding 25%, with decreased activity for these segments – commercial building, down 14%; institutional building, down 26%; and manufacturing plants, down 60%. The year-to-date decline for nonresidential building reflects in part the comparison to the briefly elevated amount during the first four months of 2011, which included such projects as the $1.2 billion redevelopment of the Delta Terminal at New York's JFK International Airport, the $1.1 billion National Security Agency data center in Utah, a $900 million semiconductor plant in Oregon, and the $580 million Transbay Transit Center in San Francisco CA. By geography, total construction during the first four months of 2012 showed a large gain in the South Atlantic, up 77%, boosted by the work at the nuclear power facilities in Georgia and South Carolina. The Midwest was unchanged year-to-date, while declines were reported in the Northeast, down 14%; the West, down 15%; and the South Central, down 20%.
Useful perspective comes from looking at twelve-month moving totals, in this case the twelve months ending April 2012 versus the twelve months ending April 2011. On this basis, total construction is up 1%, with this behavior for the major sectors – nonbuilding construction up 5%; residential building up 13%; and nonresidential building down 11%. By geography, the twelve months ending April 2012 showed the following performance for total construction compared to the prior twelve months – the South Atlantic, up 39%; the West, unchanged; the Midwest, down 6%; the South Central, down 11%; and the Northeast, down 12%.
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