The value of new construction starts increased 5 percent in October to a seasonally adjusted annual rate of $585.6 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. The gain followed a 13 percent jump for total construction starts in September, and during both September and October much of the upward push came from groundbreaking for several very large projects. By sector, nonresidential building surged in October, aided by the start of three massive manufacturing plants, and residential building resumed its upward track after a September pause. Although nonbuilding construction in October settled back from its elevated September pace, the decline was cushioned by the start of structural work valued at $2.8 billion on the Tappan Zee Bridge replacement project in New York. During the first 10 months of 2013, total construction starts on an unadjusted basis came in at $433.0 billion, up 4 percent from the same period a year ago. If the electric utility category is excluded from the year-to-date statistics, total construction starts for the first 10 months of 2013 would be up 13 percent.
The October data lifted the Dodge Index to 124 (2000=100), compared to 118 in September and the highest reading for the Index so far in 2013. During the first eight months of 2013, the Index had stayed within the fairly narrow range of 99 to 107, but the most recent two months have seen the Index climb substantially. “The levels of activity in September and October reflected the impact of several large and unusual projects, so a slower pace can be expected going forward in the near term,” said Robert A. Murray, chief economist for McGraw Hill Construction. “At the same time, October’s data did include positive signs that the underlying upward trend for construction is likely to continue, even amidst the greater uncertainty caused by the 16-day government shutdown last month. For nonresidential building, more manufacturing-related projects are reaching groundbreaking, the commercial structure types are moving upward albeit unevenly, and the educational building category is providing more evidence that it’s stabilizing after a lengthy decline. Residential building in October showed its resilience with a modest gain after losing momentum in September. And, while public works is vulnerable to federal spending cutbacks, it continues to benefit as major projects that have been in the planning pipeline are now reaching the construction start stage.”
Nonresidential building in October climbed 20 percent to $216.9 billion (annual rate). Manufacturing plant construction soared 147 percent, led by the start of these three projects: a $1.7 billion fertilizer plant in Iowa, a $1.7 billion natural gas processing plant in West Virginia and a $1.5 billion gasification plant in Louisiana that will produce industrial liquid and gas products from petroleum coke. New plant construction in Louisiana has been particularly strong through the first 10 months of 2013, up 265 percent compared to last year, with Louisiana ranked first among the 50 states in the dollar volume of manufacturing starts. The commercial categories combined rose 3 percent in October, helped in particular by strong percentage growth for stores, up 29 percent; and warehouses, up 22 percent. The store category in October was supported by a $120 million expansion to an outlet mall at the Foxwoods casino complex in Ledyard, Conn., while warehouses benefited from the start of a $50 million warehouse park in Edison, N.J. Offices and hotels retreated in October, falling 8 and 15 percent, respectively. Despite its October decline, office construction did include the start of several noteworthy projects, such as a $150 million office building in San Francisco, a $115 million office tower in Boston and an $83 million corporate headquarters building in San Diego.
On the institutional side, the educational building category grew 4 percent in October, rising for the second month in a row and reaching its strongest volume so far in 2013. There were four large high school projects valued at $75 million or greater that reached groundbreaking in October, with two in Connecticut ($94 million and $75 million), one in Texas ($92 million) and one in Maryland ($86 million). Through the first 10 months of 2013, the dollar amount for the educational building category was still down 1 percent from the prior year, but the shortfall has been narrowing as 2013 has progressed. The health-care facilities category in October dropped 20 percent after its sharp upturn in September, although October did include the start of several large hospital projects: a $550 million hospital in Chicago; a $230 million hospital in Reading, Pa.; and a $130 million hospital in Bangor, Maine. Like educational buildings, the dollar amount for health care facilities was down 1 percent through the first 10 months of 2013 from the prior year. The smaller institutional categories in October showed a mixed pattern, with declines for churches, down 26 percent; and public buildings, down 19 percent; but gains for amusement and recreational facilities, up 12 percent; and transportation terminals, up 30 percent. The amusement category was helped by the $305 million expansion to the Henry B. Gonzalez Convention Center in San Antonio while the transportation terminal category was supported by the start of the $136 million Hobby Airport International Concourse in Houston.
The 4 percent gain for total construction starts on an unadjusted basis during the first 10 months of 2013 was due to varied behavior by the three main construction sectors. Nonresidential building year-to-date rose 6 percent, as the result of this pattern by segment—commercial building, up 11 percent; manufacturing building, up 50 percent; and institutional building, down 3 percent. Residential building year-to-date climbed 26 percent, with single family housing up 28 percent and multifamily housing up 18 percent. Nonbuilding construction year-to-date dropped 17 percent, with a steep 62 percent plunge for electric utilities more than offsetting a 5 percent gain for public works.
By region, total construction starts in the first 10 months of 2013 showed increases in three of the five major regions: the Northeast, up 19 percent; the Midwest, up 10 percent; and the West, up 6 percent. Total construction declines were reported in the South Central, down 1 percent; and the South Atlantic, down 5 percent. The South Atlantic slide reflected the comparison to the first 10 months of 2012 that included the start of two massive nuclear facilities. If electric utilities are removed from the year-to-date construction statistics in the South Atlantic, then total construction for that region in 2013 would be up 20 percent.