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November Construction Slips 5 Percent
December 20, 2012 - New York, NY
At a seasonally adjusted annual rate of $421.3 billion, new construction starts in November fell 5% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The downturn came as the result of decreased activity for public works, following this sector’s elevated amount in October. Meanwhile, both nonresidential building and housing registered modest growth in November. During the first eleven months of 2012, total construction starts on an unadjusted basis were reported at $424.4 billion, up 3% compared to the same period a year ago.
The November data lowered the Dodge Index to 89 (2000=100), down from a revised 94 for October. Over the first eleven months of 2012, the Dodge Index averaged 97. “The current year has seen an up-and-down pattern for construction starts, and November qualifies as one of this year’s weaker months,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Much of the recent variation has been related to unusually large projects in a given month, and the absence of such projects in November for public works and electric utilities contributed to the slowdown for overall construction. At the same time, nonresidential building in November showed improvement after its loss of momentum during the prior two months, and housing continues to strengthen.”
Nonbuilding construction in November dropped 24% to $100.6 billion (annual rate), retreating to its lowest amount so far in 2012. The environmental public works categories in November were particularly weak, with large declines for sewer construction, down 21%; river/harbor development, down 29%; and water supply systems, down 37%. The “miscellaneous public works” category, which is comprised of such diverse project types as pipelines, mass transit, and outdoor sports stadiums, fell 56% in November. Miscellaneous public works had been boosted in October by $2.0 billion related to work on the Keystone Pipeline Gulf Coast Expansion (located in Oklahoma and Texas); by contrast the largest miscellaneous public works project in November was a $70 million stadium addition at Louisiana State University in Baton Rouge LA. Highway construction in November dropped 8%, sliding back after being lifted in October by the start of work on the I-95 HOV/HOT Lanes project in Virginia. Bridge construction was the only public works category to post a November gain, climbing 12% with the help of a $245 million bridge replacement project in Quincy MA. The electric utility category in November weakened further, dropping 8% after a steep 93% plunge in October. Due to the strength reported earlier in the year, the electric utility category in 2012 has already achieved a new annual high in current dollars, even with the depressed activity reported for October and November.
During the first eleven months of 2012, nonbuilding construction was up 1% from the same period a year ago. While public works construction year-to-date was down 1%, it was offset by a 4% gain for electric utilities. Four of the six public works categories showed year-to-date declines – bridge construction, down 3%; highways, down 9%; sewer construction, down 12%; and river/harbor development, down 21%. The two public works categories reporting year-to-date increases were water supply systems, up 7%; and miscellaneous public works, up 41%. The large gain for miscellaneous public works reflected a sharp rise in the amount of pipeline and rail-related work.
Nonresidential building, at $136.8 billion (annual rate), climbed 4% in November. The institutional sector, which had been trending downward throughout much of 2012, strengthened in November. The educational building category advanced 16%, helped by such projects as a $180 million medical research facility in Cincinnati OH, an $88 million building renovation at the University of Chicago in Chicago IL, and an $87 million high school in Franklin MA. Healthcare facilities in November climbed 13%, reflecting the lift coming from the $651 million Veterans Administration Medical Center in New Orleans LA and a $145 million hospital in Rochester NY. Other gains in November were reported for amusement-related projects, up 19%; and transportation terminal work, up 16%. Declines in November were reported for public buildings (courthouses, detention facilities, and military projects), down 48%; and churches, down 3%.
The commercial categories generally lost momentum in November, even with the start of several noteworthy projects. Office construction retreated 5%, although November did include groundbreaking for a $125 million office building in Boston MA and a $68 million data center for Apple in Prineville OR. Store construction in November retreated 7%, even with the start of an $85 million outlet mall in Chesterfield MO, while warehouse construction dropped 15%. Hotel construction in November was down 19%, yet the month did include the start of a $183 million hotel project at Denver International Airport. The manufacturing plant category in November jumped 153% from an exceptionally weak October, although November’s pace was still 42% below the average reported for this category during the first nine months of 2012.
For the January-November period of 2012, nonresidential building was down 13% relative to the same period a year ago. The institutional sector fell 14%, as weaker activity was reported for its two largest categories – educational buildings, down 15%; and healthcare facilities, down 12%. Other institutional declines on a year-to-date basis were the following – public buildings, down 10%; churches, down 23%; and amusement-related projects, down 24%. The manufacturing plant category year-to-date plummeted 45%, reflecting the comparison to 2011 which included a $3.0 billion coal-to-gasoline plant and two large semiconductor plants. The commercial sector year-to-date managed to increase 2%, lifted by increases for stores, up 8%; warehouses, up 9%; and hotels, up 20%. Office construction year-to-date was down 14%, due in part to the comparison to 2011 which included the start of a $1.1 billion government data center in Utah. While the dollar amount for nonresidential building was down 13% for the first eleven months of 2012, square footage for nonresidential building was up 2% during this time.
Residential building in November grew 3% to $183.9 billion (annual rate). Single family housing held steady, maintaining the improved activity reached in October, while multifamily housing climbed 17%. The multifamily increase in November was supported by the start of four condominium/apartment projects valued each at $100 million or more, located in Miami FL ($131 million), Boston MA ($116 million), Chicago IL ($107 million), and New York NY ($100 million).
During the first eleven months of 2012, residential building advanced 28% compared to the same period a year ago. Single family housing climbed 29%, as the result of this year-to-date performance by geography – the West, up 41%; the Midwest, up 30%; the South Atlantic, up 27%; the South Central, up 23%; and the Northeast, up 14%. Multifamily housing rose a similar 27%, as the result of this year-to-date performance by geography – the West, up 40%; the South Atlantic, up 31%; the South Central, up 26%; the Northeast, up 25%; and the Midwest, up 12%. The top five metropolitan areas in terms of the dollar amount of multifamily starts were – New York NY, up 33%; Washington DC, up 6%; Miami FL, up 144%; Los Angeles CA, up 29%; and Boston MA, up 21%. The large increase for multifamily housing in the West was helped by the 29% gain for Los Angeles, as well as growth in such metropolitan areas as Seattle WA, up 51%; San Francisco CA, up 23%; Denver CO, up 114%; and Portland OR, up 79%.
The 3% pickup for total construction starts at the national level during the first eleven months of 2012 was the result of a mixed performance at the five region level. Leading the way was the South Atlantic, up 20%, with much of the upward push coming from the start of two massive nuclear power projects in Georgia and South Carolina. If these two projects are excluded, then total construction in the South Atlantic would be down 1%. Year-to-date gains for total construction were also reported for the South Central and the Midwest, each up 7%. Year-to-date declines for total construction were reported for the Northeast, down 5%; and the West, 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.
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 http://www.mcgraw-hill.com/.