New construction starts in March advanced 7% to a seasonally adjusted annual rate of $521.4 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. Nonresidential building picked up the pace after its lackluster performance at the outset of this year, while nonbuilding construction managed a moderate gain.

Meanwhile, residential building settled back as single-family housing remained sluggish. During the first three months of 2014, total construction starts on an unadjusted basis were reported at $107.4 billion, down 2% from the same period a year ago. The latest month’s data lifted the Dodge Index to 110 (2000=100), up from February’s 103, and close to last year’s average reading for the index at 112. 

“The slow start for construction activity in early 2014 can be attributed to tough winter weather conditions, in combination with the up-and-down pattern that’s frequently been present during the hesitant upturn witnessed over the past two years,” stated Robert A. Murray, chief economist for McGraw Hill Construction. “This is particularly true for nonresidential building, which bounced back sharply in March after depressed activity in January and February, alleviating some concern that its recovery may be stalling,” he said.

“Nonresidential building’s potential for more growth in 2014 is being supported by a rising volume of bank lending directed at commercial real estate development, more energy-related manufacturing projects and signs that the institutional building sector is finally turning the corner after five years of decline,” Murray added.

“Nonbuilding construction in 2014 is seeing a less severe pullback for electric utilities compared to last year, although public works is generally proceeding at a slower clip. Residential building so far in 2014 is benefitting from more strength for multifamily housing, yet the loss of momentum for single-family housing in the first three months of 2014 stands out relative to the steady gains registered in 2012 and most of 2013,” Murray said.

Nonresidential Building

Nonresidential building in March jumped 24% to $176.3 billion (annual rate), regaining upward movement after declines in January (down 9%) and February (down 7%). The often volatile manufacturing plant category provided much of the lift in March, surging 140% after a weak February. 

Large manufacturing facilities that reached groundbreaking in March included these energy-related projects: an $800-million methanol chemical plant in Texas, a $400-million upgrade to an oil refinery in Minnesota, an $80-million crude oil terminal in New Mexico and a $56-million biomass-to-gasoline refinery in Louisiana.

The commercial categories in March edged up 1%, reflecting a mixed pattern by individual structure type. Office construction continued its ascent from low levels, advancing 17% in March with the help of these large projects: a $160-million office building at the Fan Pier site in Boston, a $100-million tenant fit-out at One World Trade Center in New York City, an $87-million office building in Austin, Texas, and an $83-million office building in Houston. Through the first three months of 2014, the top five metropolitan areas ranked by the dollar amount of new office starts were New York, Houston, Boston, Washington, D.C., and San Antonio.

Hotel construction in March increased 19%, with the support of $95 million for the hotel portion of a $200-million mixed-use facility at the Mall of America in Bloomington, Minn. Store construction in March receded 6%, although it did include $65 million for the retail portion of the mixed-use facility at the Mall of America. Warehouse construction in March dropped 45%, experiencing a pause from its well-established upward trend.

The institutional side of the nonresidential building market grew 30% in March after a subdued February. Health care construction surged 64%, in a departure from its generally flat pattern of activity over the past few years, reflecting the March groundbreaking for an $820-million Kaiser Permanente hospital in San Diego.

The educational building category in March improved 18%, with the support of such projects as a $64-million geosciences building at the University of Colorado Boulder, a $64-million classroom facility at Rutgers University in New Brunswick, N.J., a $50-million high school in North Little Rock, Ark., and a $46-million renovation of a vocational school in Tyngsboro, Mass.

Of the smaller institutional structure types, the public buildings category was unusually strong in March, rising 125% with the start of a $317-million federal courthouse building in Los Angeles and a $105-million addition to a county courthouse building in St. Louis.

The amusement-related category advanced 44% in March and included groundbreaking for such projects as a $120-million university sports arena in Champaign, Ill., and $110 million for renovation work at the Billie Jean King National Tennis Center in Flushing, N.Y. Church construction and transportation terminal work showed weaker activity in March, falling 14% and 28%, respectively.

Nonbuilding Construction