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June Construction Retreats One Percent
July 20, 2012 - New York, NY
New construction starts in June slipped 1% to a seasonally adjusted annual rate of $446.1 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. After the elevated activity that was reported during March and April, which reflected the lift coming from two nuclear power projects, total construction in May and June returned to a level just slightly above the average monthly pace reported during the previous year. June featured a moderate loss of momentum for nonresidential building, after this sector's improved performance in May. At the same time, residential building in June maintained its gradual upward trend, while nonbuilding construction was unchanged as the result of divergent behavior by its public works and electric utility segments. For the first six months of 2012, total construction starts on an unadjusted basis came in at $225.0 billion, up 4% from the same period a year ago.
June's data produced a reading of 94 for the Dodge Index (2000=100), compared to a revised 95 for May. For all of 2011, the Dodge Index averaged 92. "The construction start statistics for the most part continue to hover within a set range, showing gains for some project types but further weakness for other project types," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "Total construction activity had jumped in March and April, due primarily to the start of two massive nuclear power projects – $8.5 billion for work on Units 3 and 4 at the Vogtle nuclear power facility near Waynesboro GA and another $8.5 billion for work on Units 2 and 3 at the Virgil C. Summer nuclear power facility near Jenkinsville SC. Aside from the lift coming from this year's nuclear power projects, total construction activity during the first half of 2012 has basically shown a hesitant up-and-down pattern. On the plus side, gains are being reported for several commercial building categories, and the strengthening trend for multifamily housing is now being joined by moderate growth for single family housing. On the negative side, such institutional project types as educational buildings and healthcare facilities continue to weaken, along with further declines for several public works categories."
Nonresidential building in June fell 4% to $148.7 billion (annual rate), following its 12% increase in May. For the commercial sector, office construction in June dropped 31% after jumping 34% in May, which benefitted from the start of several large data center and corporate headquarters projects. The largest office projects that were reported as June starts were a $200 million data center in Kings Mountain NC, a $65 million office building in Arlington VA, and a $35 million renovation to one of the World Bank facilities in Washington DC. Hotel construction was also down sharply in June, falling 23% after surging 49% in May. Store construction in June grew 4%, helped by groundbreaking for a $52 million outlet mall in Rosemont IL and a $32 million outlet mall in Woodstock GA. Warehouse construction in June managed to edge up 1%, aided by the start of a $78 million Family Dollar distribution center in Utah. Manufacturing plant construction in June was down 10%, although June did include the start of several large projects – a $375 million petrochemical plant expansion in Louisiana, a $196 million pharmaceutical research facility in Massachusetts, and a $135 million construction equipment manufacturing plant in Georgia.
The institutional sector in June showed a mixed performance by project type. The educational building category grew 4%, helped by such June projects as a $166 million research center at the University of Chicago in Chicago IL, a $101 million technical school in Danvers MA, and an $80 million building at Northwestern University in Evanston IL. Healthcare facilities in June climbed 13%, supported by such projects as a $300 million hospital tower in Columbus OH, a $130 million hospital in Morganton NC, and a $113 million hospital addition in Boulder CO. While both the education and healthcare categories showed gains in June relative to May, for each category the level of activity in June was still below its average monthly pace for 2011, with educational buildings down 8% and healthcare facilities down 11%. For the smaller institutional categories, amusement-related construction advanced 43% in June from a very weak May, lifted by the start of such projects as an $80 million sports arena in Anchorage AK and a $42 million casino in Laveen AZ. Church construction was also up from a very weak May, rising 41%. June declines were reported for the public buildings category (detention facilities and courthouses), down 13%; and transportation terminals, down 40%.
During the first six months of 2012, nonresidential building fell 16% from a year ago. The year-to-date decline for nonresidential building has been getting smaller as 2012 has progressed, although it still reflects the comparison to the briefly elevated amount during the first half of 2011, which included such projects as the $1.2 billion redevelopment of the Delta Terminal at New York's JFK International Airport and the $1.1 billon National Security Agency data center in Utah. The commercial categories year-to-date dropped 4%, pulled down by a 24% decline for office construction. If last year's $1.1 billion data center in Utah is excluded from the comparison, then commercial building in 2012's first half would be unchanged and office construction would be down a less pronounced 15%. The other commercial categories showed gains for the first half of 2012 versus last year – stores and hotels, each up 7%, and warehouses up 12%. Manufacturing plant construction in the first six months of 2012 dropped 28% from a year ago. The institutional categories in the January-June period of 2012 came in 20% below last year, including declines of 16% for educational buildings and 19% for healthcare facilities.
Residential building, at $163.7 billion (annual rate), increased 1% in June compared to May. The upward push was provided by multifamily housing, which increased 5% in June on top of its 30% surge in May. Large multifamily projects that reached groundbreaking in June were led by the following – a $211 million apartment building in New York NY, a $147 million apartment complex in Weehawken NJ, the $144 million apartment portion of a mixed-use building in Hollywood CA, and a $139 million apartment building in Los Angeles CA. Single family housing in June was unchanged from May, essentially stabilizing after registering gains during the first five months of 2012. The June pace for both sides of the housing market were considerably above their respective monthly averages during 2011, with multifamily housing up 45% and single family housing up 26% on this basis.
At the six-month mark of 2012, residential building in dollar terms advanced 25% from the first half of 2011, with multifamily housing climbing 32% while single family housing grew 23%. The top five multifamily markets by metropolitan area during the first half of 2012 ranked by the dollar amount of new projects, were the following (with the percent change from a year ago) – New York NY, up 88%; Washington DC, down 19%; Los Angeles CA, up 27%; Dallas-Ft. Worth TX, up 40%; and Boston MA, up 14%. For single family housing, the year-to-date gains were widespread by geography, with all five major regions of the U.S. reporting double-digit increases relative to a year ago – the West, up 32%; the Midwest, up 26%; the South Atlantic, up 21%; the South Central, up 20%; and the Northeast, up 12%.
Nonbuilding construction, at $133.7 billion (annual rate), was unchanged in June relative to May, as the result of a sharp increase for the public works sector offsetting a steep decline for electric utilities. Public works construction climbed 26% in June, led by a 129% surge for the "other public works" category, which includes such diverse project types as site work, mass transit, pipelines, and outdoor sports stadiums. A major boost to the "other public works" category in June was provided by $1.0 billion estimated for work on a new football stadium for the San Francisco 49ers in Santa Clara CA. Also noteworthy "other public works" projects in June included $280 million for rail transit work in Fremont CA and $225 million for site work at Governor's Island in New York NY. Bridge construction in June climbed 25%, supported by $386 million for work on the West Oahu Farrington Highway Guideway project in Honolulu HI, while highway construction in June improved 3%. The environmental public works categories in June showed the following performance – river/harbor development, up 3%; sewers, unchanged; and water supply systems, down 10%. Electric utility construction in June plunged 60%, sliding from the heightened activity that was reported earlier in 2012. Even with this steep decline, electric utility construction in June still included the start of three large wind power projects, located in Colorado ($670 million), North Dakota ($314 million), and Alaska ($65 million).
For the first six months of 2012, nonbuilding construction was up 11% compared to last year. The electric utility category grew 30% year-to-date, in particular reflecting the start of the Vogtle and Summer nuclear power projects in March and April. Public works construction registered a 1% year-to-date gain, due mostly to a 58% jump for the "other public works" category from its depressed amount during the first half of 2011. Modest 2012 year-to-date gains were reported for bridges and sewer construction, each up 2%. Decreased year-to-date activity was reported for highways, down 12%; accompanied by declines for water supply systems, down 10%; and river/harbor development, down 15%.
The 4% gain for total construction starts at the U.S. level during the first six months of 2012 was due to a varied pattern by geography. The South Atlantic region advanced 50% year-to-date, lifted by work at the nuclear power facilities in Georgia and South Carolina. Total construction starts in the Midwest were up 6%, but year-to-date declines were reported in the West, down 9%; and in the South Central and Northeast, each down 10%.
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.
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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 http://www.mcgraw-hill.com/.