At a seasonally adjusted annual rate of $667.6 billion, new construction starts in February advanced 10% compared to the previous month, according to Dodge Data & Analytics.
Much of the lift in February came from the nonbuilding construction sector, as its electric power and gas plant category included a $3-billion segment of a liquefied natural gas (LNG) export terminal in Texas, as well as the start of six powerplant projects, each valued at more than $200 million.
Nonresidential building also helped the February start totals with a moderate gain, resuming its hesitant upward track after the lackluster activity reported at the outset of the year. However, residential building settled back in February following an improved January performance.
For the first two months of 2016, total construction starts on an unadjusted basis were $87.1 billion, down 16% from the same period a year ago, which featured the start of several massive LNG terminal projects.
If the volatile electric power and gas plant category is excluded, total construction starts on a seasonally adjusted basis in February would be down 1% from January, while the year-to-date comparison on an unadjusted basis would show a 6% decline.
The February statistics produced a reading of 141 for the Dodge Index (2000=100), compared to 129 for January. For 2015 as a whole, the Dodge Index averaged 138.
“The month-to-month pattern of construction starts will often reflect the presence of unusually large projects, and this explains February’s gain relative to January,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “It also helps to explain the elevated and unsustainable pace of total construction starts during the early months of 2015, and by comparison, the substantial year-to-date declines for nonbuilding construction and nonresidential building so far in 2016,” he said.
“During the first two months of 2015, there were 13 projects valued at $500 million or more that reached the construction start stage compared to five such projects during the first two months of 2016. On balance, the current economic environment is still favorable for the continued expansion of construction activity, which may not show up in the year-to-date statistics for total construction starts until the second half of this year.
“Interest rates continue to be low, more construction-related bond measures have been passed at the state and local government level, and the new multiyear federal transportation bill is in place. While there are signs that banks are beginning to tighten standards on commercial real estate loans at the urging of federal bank regulators, market fundamentals such as occupancies and rents remain generally supportive of new construction,” Murray said.
Nonbuilding construction in February surged 49% to $200.9 billion (annual rate). The electric power and gas plant category jumped 328%, boosted by the start of the $3-billion third segment (or train) of an LNG export terminal in Freeport, Texas. The first two segments of this project were entered as construction starts back in January 2015.
There were also six large powerplant projects entered as February starts: a $761-million, gas-fired power plant in Connecticut; plus five large solar power projects, two of which are located in Texas ($394 million and $375 million), two in California ($388 million and $270 million), and one in Arizona ($250 million.)
In addition, February included the start of several large wind farm projects, two located in Texas ($186 million and $185 million) and one in West Virginia ($155 million).
The public works categories as a group slipped 1% in February, essentially stabilizing at January’s level, although with a different mix by category type. Highway and bridge construction, which had climbed 19% in January with the help of a $655-million highway toll lanes project in North Carolina, retreated 17% in February.
Also dropping back in February was sewer construction, sliding 7%. On the plus side, water supply construction increased 53% due to the February start of a $159-million water treatment plant in Texas, while river/harbor development grew 33%.
The miscellaneous public works category rose 14% in February, supported by three large projects—a $520-million dry gas gathering pipeline system for the Utica shale field in Ohio, the $220-million RIO oil pipeline in Texas and New Mexico, and the $100-million renovation to Raymond James Stadium in Tampa, Fla.
Nonresidential building, at $185.5 billion (annual rate), rose 4% in February. The commercial building categories as a group increased 15%, strengthening for the third month in a row after particularly weak activity was reported back in November.
Hotel construction in February climbed 48%, aided by the start of the $357-million hotel portion of the $530-million Gaylord Rockies Resort and Convention Center in Colorado, and the $177-million hotel portion of the $306-million Omni City Center Convention Hotel in Louisville, Ky.
Office construction in February advanced 25%, with the push coming from five large projects: the $275-million Southport Waterfront Corporate Campus in Renton, Wash.; a $266-million office building in Washington, D.C.; a $200-million Facebook data center in Prineville, Ore.; a $178-million research and development campus in Irvine, Calif.; and a $174-million office building in San Francisco.
During the first two months of 2016, the top five metropolitan areas ranked by the dollar amount of new office starts were: San Francisco; New York City; Washington, D.C., Seattle; and Boston.
On the negative side for commercial building, both stores and warehouses retreated in February, falling 15% and 7% respectively. The manufacturing building category in February dropped 43% from its improved January amount, although the latest month did include the start of a $128-million electrical control development center in Pennsylvania.
The institutional building categories as a group edged up 2% in February, registering a slight rebound after a 10% decline in the previous month. The amusement and recreational category climbed 15% in February, lifted by $173 million for the convention center portion of the Gaylord Rockies Resort and Convention Center in Colorado.
More substantial percentage gains were reported for transportation terminals, up 74% with the boost coming from $79 million for rail station work in Waipahu, Hawaii, and the religious building category which rebounded 83% after depressed activity in January.
In contrast, educational facilities settled back 13% in February following 19% growth in the previous month. Despite the decline, February did include groundbreaking for several noteworthy educational facility projects, such as a $134-million business school facility at Carnegie Mellon University in Pittsburgh and a $90-million high school in Alabaster, Ala. Decreased activity in February was also reported for health care facilities and the public buildings category, each falling 8%.
Residential building in February dropped 5% to $281.3 billion (annual rate), following a 5% gain reported in January. Single-family housing receded 3%, reflecting a varied pattern by geography—the South Atlantic, down 9%; the West and South Central, each down 5%; and the Northeast and Midwest, each up 7%.
Multifamily housing slipped 8% in February after strengthening 24% over the previous two months. Even with the pullback, February did include groundbreaking for eight multifamily projects valued at $100 million or greater, led by the $233-million Gran Paraiso Bay condominium building in Miami; a $165-million residential tower in Atlanta; a $143-million condominium building in West New York, N.J.; and the $112-million multifamily portion of the Omni City Center Convention Hotel in Louisville Ky.
During the first two months of 2016, the leading metropolitan area in terms of the dollar amount of multifamily starts was New York City, maintaining its number one ranking for this project type. Rounding out the top five for multifamily were Miami, Boston, Atlanta and San Francisco.
The 16% decline for total construction starts on an unadjusted basis during the first two months of 2016 versus last year was the result of a mixed performance by major sector. Nonbuilding construction plunged 34% year-to-date, with electric utilities and gas plants down 55% while public works retreated a more moderate 9%.
Nonresidential building dropped 21% year-to-date, with manufacturing plant construction down 55%, the institutional building segment down 25% and the commercial building segment down 7%.
Residential building registered a 9% year-to-date gain, with single-family housing up 8% and multifamily housing up 12%.
By geography, total construction starts for the January-February period of 2016 showed a 46% decline for the South Central region, which last year included the start of several massive LNG terminal projects.
The other four regions revealed some strengthening for year-to-date total construction starts—the Midwest and Northeast, each up 5%; the South Atlantic, up 2%; and the West, up 1%.