The value of new construction starts increased 5% 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% 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% 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%.
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
Nonresidential building in October climbed 20% to $216.9 billion (annual rate). Manufacturing plant construction soared 147%, 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% 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% in October, helped in particular by strong percentage growth for stores, up 29%; and warehouses, up 22%.
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 benefitted from the start of a $50-million warehouse park in Edison, N.J. Offices and hotels retreated in October, falling 8% and 15% 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% 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% from the prior year, but the shortfall has been narrowing as 2013 has progressed.
The health care facilities category in October dropped 20% 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% 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%; and public buildings, down 19%; but gains for amusement and recreational facilities, up 12%; and transportation terminals, up 30%.
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.
