The value of new construction starts in September dropped 5% from the previous month to a seasonally adjusted annual rate of $523.7 billion, according to Dodge Data & Analytics. Decreased activity was reported for both nonresidential building and housing, while the nonbuilding construction sector managed a partial rebound after its August decline.
Through the first nine months of 2015, total construction starts on an unadjusted basis were $497.4 billion, up 12% from the same period a year ago. Excluding the electric utility and gas plant category, which soared earlier in 2015 due to the start of several massive liquefied natural gas (LNG) terminals, total construction starts during the first nine months of 2015 would be up 5% compared to last year.
The September data produced a reading of 111 for the Dodge Index (2000=100), down from 117 in August. “The level of construction starts was subdued during both August and September, retreating from the strength shown earlier in the year,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “The pause for total construction is perhaps best viewed from the vantage point of the three major construction sectors. For nonresidential building, the volume of construction starts soared 24%
in 2014. While activity has leveled off in the near term for its commercial and institutional segments, much of this year’s softness for nonresidential building is related to a decreased amount of manufacturing plant construction, adversely affected by the sluggish global economy and falling energy prices. Economic factors that influence the commercial and institutional segments, such as receding vacancies and funding support from state and local bond measures, remain positive.
“For residential building, the month-to-month variation has reflected the pattern of multifamily housing, which in August and September fell back from robust activity in June and July. Multifamily housing is still on track for double-digit growth in 2015. For nonbuilding construction, much of this year’s boost during the first half came from the start of several massive projects, including work on the Interstate 4 Ultimate Project in central Florida and several LNG terminals on the Gulf Coast of Texas and Louisiana.
"The exceptional amount of nonbuilding construction starts in the first half of 2015 was not sustainable, and activity is now proceeding at a more moderate pace. Going forward, the performance of nonbuilding construction will be affected in large measure by the progress made by Congress in passing the next multiyear federal transportation bill,” Murray said.
Nonresidential building in September dropped 4% to $152.9 billion (annual rate). The institutional categories as a group fell 13%, as educational facilities retreated 20% from the elevated amount reported in August.
Even with the decline, there were several noteworthy education projects that reached groundbreaking in September, including the $300-million Academy Museum of Motion Pictures in Los Angeles, a $130-million preparatory school in New York City, and a $115-million building for the University of Connecticut in Hartford.
Also registering September declines were public buildings (courthouses and detention facilities), down 42%; and religious buildings, down 31%.
On the plus side, transportation terminal work in September increased 21%, helped by the start of a $150-million airline terminal at George Bush Intercontinental Airport in Houston. Amusement and recreational facilities advanced 12% in September, reflecting the start of a $125-million addition to the Greater Columbus Convention Center in Columbus, Ohio, and health care facilities edged up 2%.
The commercial building group in September improved 4%, regaining some ground after a 24% plunge in August. Office construction climbed 20%, supported by such projects as the $280-million Capital One Bank headquarters in Fairfax, Va.; and the $62-million renovation (phase 4) of the U.S. Dept. of Commerce Building in Washington, D.C.
Hotel construction in September increased 19%, aided by a $140-million resort hotel in Rohnert Park, Calif., while warehouse construction grew 18%, with the boost coming from large warehouse projects in Graham, N.C. ($125 million) and Cranbury, N.J. ($95 million).
Sliding back in September were store construction, down 6%; and garages/service stations, down 34%. Manufacturing plant construction in September increased 23% after a weak August, with the lift coming from a $500-million urea production facility at the Great Plains Synfuels Plant in North Dakota.
Residential building, at $236.9 billion (annual rate), dropped 11% in September. Multifamily housing, which has shown some volatility on a month-to-month basis, plunged 30% from its August amount. Only two projects valued at $100 million or more reached groundbreaking in September—a $132-million apartment building in New York City and a $119-million residential tower in Seattle.