At a seasonally adjusted annual rate of $495.7 billion, new construction starts in May advanced 5% from the previous month, according to McGraw Hill Construction, a division of McGraw Hill Financial. Much of the upward lift came from nonresidential building, which registered moderate growth for the second month in a row after its sluggish performance at the outset of 2013.

Smaller gains in May were reported for housing and nonbuilding construction (public works and electric utilities).  During the first five months of 2013, total construction starts on an unadjusted basis were reported at $187.6 billion, down 3% from the same period a year ago.

The 2013 year-to-date volume for total construction reflected a steep decline in the dollar amount for new electric utility projects relative to a robust first half of 2012. If electric utilities are excluded, total construction starts would be up 10% year-to-date, helped in particular by the strengthened pace for housing.

May’s data raised the Dodge Index to 105 (2000=100), up from the 100 reported for April, and slightly above the average index reading for all of 2012 at 101.

“The construction industry has shown modest improvement over the past year, helped by some project types while restrained by others,” said Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “The housing sector played a leading role last year in lifting overall construction activity, and while this year’s month-to-month gains have been smaller, housing continues to lead the hesitant construction expansion. Nonresidential building has yet to provide much of a contribution, as tenuous gains for commercial building have been offset by further weakness for institutional building. Still, the April and May pickup for nonresidential building could be a sign of more growth to come.

“As for nonbuilding construction, the negative impact from the sequester has so far turned out to be less severe on the public works categories than anticipated,” Murray said. “However, new electric utility starts are in the midst of sharp decline from last year’s record amount, and the extent of that decline is limiting whatever gain may be possible this year for total construction.”

Nonresidential Building

Nonresidential building in May grew 9% to $156.4 billion (annual rate), following its 6% rise in April. For the commercial categories, stores and shopping centers are gathering momentum, with a 16% increase reported for May. Large retail projects that reached groundbreaking in May included a $60-million shopping center in Fresno, Calif., and the $52-million second phase of the City Point retail and residential complex in Brooklyn, N.Y.  New hotel construction starts soared 94% in May, boosted by the $415-million SLS Las Vegas hotel complex on the site of the former Sahara Hotel and Casino.

Office construction in May edged up 3%, following a substantial 58% jump in April. Large projects in May that helped to keep office construction at its improved pace were the $250-million renovation of the International Monetary Fund Headquarters in Washington, D.C.; the $200-million renovation of the United Nations General Assembly Building in New York City; a $120-million office building in McLean, Va., and a $113-million expansion to a data center in Dallas.

Warehouse construction was the one commercial project type to retreat in May, sliding 7%, despite the start of a $100-million distribution facility in Edgerton, Kan. The nonresidential building total was helped in May by a considerable gain for manufacturing plants, which jumped 70% with the start of a $378-million technology development center in Malta, N.Y., and a $110-million expansion to a health-care products manufacturing plant in Athens.

The institutional categories in May showed a mixed pattern. Educational facilities rebounded 10% after a weak April, helped by projects such as the $250-million expansion of the San Francisco Museum of Modern Art, a $91-million high school in Flower Mound, Texas; and a $67-million high school addition in Alexandria, Va. May included groundbreaking for 16 high school projects, each with a construction start cost of $10 million or more.

The public buildings category in May climbed 95% from a very depressed April, supported by the start of a $125-million detention facility in Redwood City, Calif. However, health-care facilities fell back 10% in May, despite the start of a $175-million hospital tower in Orlando. Other declines were reported for amusement-related projects, down 17%; churches, down 27%; and transportation terminals, down 33%.

The decline for transportation terminals came relative to a very strong April, and occurred despite the May start of several large airport terminal projects—a $229-million renovation of Terminal 5 at Los Angeles International Airport, a $90-million gate replacement project at Fort Lauderdale International Airport, and a $75-million renovation for Terminal E at Dallas-Ft. Worth International Airport.