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August Construction Advances 8 Percent
September 21, 2012 - New York, NY
At a seasonally adjusted annual rate of $433.9 billion, new construction starts in August climbed 8% relative to July, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. After declines in the previous three months, the August pickup was the result of greater activity for each of construction's three main groups – nonresidential building, residential building, and nonbuilding construction. During the first eight months of 2012, total construction starts on an unadjusted basis came in at $304.5 billion, up 3% from the same period a year ago.
The August statistics raised the Dodge Index to 92 (2000=100), up from July's 85. After reaching 114 in April, which was lifted by the start of a massive nuclear power plant in South Carolina, the Dodge Index then retreated through July. With its August rebound, the Dodge Index has returned to the average level that was reported for all of 2011. "The pattern of construction starts continues to exhibit an up-and-down pattern, with the end result being that overall construction activity has yet to show much in the way of sustained growth," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "Gains for some project types continue to be offset by declines for other project types. So far in 2012, housing has been one of the brighter areas for construction – multifamily housing is strengthening, and single family housing is finally registering steady growth, although in a very gradual manner. The commercial project types have shown hesitant upward movement, while this year's earlier weakness for the institutional sector seems to be easing a bit. Electric utility construction is seeing another year of exceptionally strong activity, but the public works sector continues to deal with spending limitations. If overall construction activity is to establish a more solid upward trend, the degree of uncertainty surrounding the U.S. economy needs to recede, which may prove difficult to achieve in the near term given the impending 'fiscal cliff' at the end of 2012."
Nonresidential building in August grew 7% to $147.7 billion (annual rate). Much of the boost in August came from the institutional categories, in contrast to this sector's generally weak performance during most of 2012. Educational facilities in August increased 17%, helped by a greater amount of new high school construction projects, with the three largest located in Indiana ($100 million), New York ($88 million), and Massachusetts ($70 million). Several university-related projects also contributed to the August gain for educational facilities, led by the start of a $90 million science building at Middle Tennessee State University in Murfreesboro TN and a $75 million building at George Washington University's School of Public Health in Washington DC. The transportation terminal category in August jumped 111%, reflecting $325 million for work on a subway station in New York NY and a $200 million expansion to the JetBlue terminal at New York's JFK International Airport. The amusement category in August climbed 23%, helped by a $78 million auditorium expansion in Charleston SC, while church construction grew 11% from a depressed July. Institutional categories that retreated in August were healthcare facilities and public buildings, as each dropped 11%.
Several commercial categories in August lost momentum, slipping back after the improvement shown earlier this year. Store construction in August fell 10% from July, while warehouse construction decreased a more substantial 29%. As the same time, both stores and warehouses were able to hold onto year-to-date gains compared to last year, rising 10% and 3%, respectively. Office construction in August retreated 5%, even with groundbreaking for such projects as a $44 million headquarters building in Kansas City MO and a $39 million office building in Houston TX. Showing slight growth in August was hotel construction, which edged up 2% with the help of a $50 million hotel in Milwaukee WI. Manufacturing plant construction in August also posted a slight gain, increasing 1%. Large manufacturing projects that reached groundbreaking in August included a $300 million semiconductor research and development facility in Arizona and a $150 million tire plant in South Carolina.
Residential building, at $168.9 billion (annual rate), climbed 9% in August. Multifamily housing bounced back 35% after pausing in July, matching its strong June pace. Large multifamily projects that reached groundbreaking in August included five that were valued at $100 million or more – a $150 million apartment building in Brooklyn NY, a $132 million condominium complex in Key Biscayne FL, a $127 million residential tower in Boston MA, a $100 million apartment building in Long Island City NY, and a $100 million apartment building in Washington DC. Through the first eight months of 2012, the most active metropolitan areas in terms of the dollar volume of new multifamily starts were: New York NY, Washington DC, Los Angeles CA, Miami FL, and Boston MA. Single family housing in August grew 3%, and has shown small yet steady gains during the first eight months of 2012, such that the amount in August was 22% higher than at the end of last year. The August gain for single family housing included increases for four major regions – the Midwest, up 5%; the West, up 4%; the South Central, up 2%; and the South Atlantic, up 1%; while the Northeast settled back 2%.
Nonbuilding construction in August increased 8% to $117.3 billion (annual rate). After the steep declines of the previous three months, electric utility construction in August surged 103%. Large electric utility projects reported as August starts were led by a $550 million solar power facility in Arizona, a $520 million solar power facility in California, and a $322 million gas-fired power plant in New Jersey. The public works categories in August included gains for two project types – bridges, up 28%; and "other public works" (which includes pipelines, mass transit, and site work), up 19%. The bridge category was boosted by a $433 million bridge for a light rail line in Santa Monica CA. The "other public works" category included $224 million for work on the Greencore CO2 pipeline in Wyoming. In contrast, weaker activity in August was reported for the remaining public works categories – sewer systems, down 2%; streets and highways, down 4%; water supply systems, down 10%; and river/harbor development, down 51%.
The 3% rise for total construction starts on an unadjusted basis during the first eight months of 2012 reflected greater activity for two of the three main construction groups. Residential building advanced 25%, with both its single family and multifamily segments increasing by that percentage amount. Nonbuilding construction grew 3% year-to-date, as a 17% gain for electric utilities outweighed a 2% drop for public works. Nonresidential building year-to-date ran counter to the other two main construction groups, sliding 13%. The nonresidential building decline was due to this pattern by segment – commercial building, down 2%; institutional building, down 17%; and manufacturing building, down 30%. The year-to-date decline for nonresidential building has been getting smaller as 2012 has proceeded, although it still reflects the comparison to the same period a year ago which included such projects as a $1.5 billion semiconductor plant in Arizona, the $1.2 billion redevelopment of the Delta Terminal at New York's JFK International Airport, and the $1.1 billion National Security Agency data center in Utah.
By region, total construction starts during the first eight months of 2012 featured a large gain for the South Atlantic, up 37%, with much of the boost coming from the start of two massive nuclear power projects in Georgia and South Carolina. Total construction starts in the Midwest were up 5% year-to-date, but declines were reported for the West and Northeast, each down 7%; and the South Central, down 8%.
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:
McGraw-Hill announced on September 12, 2011, its intention to separate into two public companies: McGraw-Hill Financial, a leading provider of content and analytics to global financial markets, and McGraw-Hill Education, a leading education company focused on digital learning and education services worldwide. McGraw-Hill Financial's leading brands include Standard & Poor's Ratings Services, S&P Capital IQ, S&P Indices, Platts energy information services, and J.D. Power and Associates. With sales of $6.2 billion in 2011, the Corporation has approximately 23,000 employees across more than 280 offices in 40 countries. Additional information is available at McGraw-Hill Companies.