At a seasonally adjusted annual rate of $677.8 billion, new construction starts in November climbed 13% from the previous month, according to Dodge Data & Analytics (formerly McGraw Hill Construction). Nonresidential building had a particularly strong month, lifted by the start of several unusually large projects, including two massive manufacturing plants and an airport terminal redevelopment.
The nonbuilding construction sector also contributed to the latest month’s surge, boosted by a liquefied natural gas facility. Meanwhile, residential building retreated in November, as multifamily housing settled back from its brisk pace in October. For the first 11 months of 2014, new construction starts on an unadjusted basis were $530.8 billion, up 7% from the same period a year ago.
The November statistics raised the Dodge Index to 143 (2000=100), up from a revised 127 for October and marking the strongest month so far in 2014.
“After the sluggish activity witnessed at the outset of 2014, new construction starts have generally strengthened, showing an up-and-down pattern around a rising trend, with November coming in especially strong,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “While residential building has decelerated in 2014 due to the pause by single-family housing, the nonresidential building sector has assumed the leading role in keeping the construction expansion going.
“Part of this year’s strength for nonresidential building comes from a surge of manufacturing plant projects, featuring more energy-related production facilities as well as activity from other industrial sectors. The commercial side of nonresidential building is continuing its moderate growth path, supported by further improvement in market fundamentals and greater investor interest. And the institutional side of nonresidential building has finally turned the corner after five years of decline, aided by the improved financing climate and the passage of numerous construction bond measures in recent years,” Murray said.
Nonresidential Building
Nonresidential building in November soared 32% to $256.7 billion (annual rate). A substantial boost came from a 253% increase for the manufacturing plant category, maintaining the often-volatile behavior that’s been present this year. The two largest manufacturing projects entered as November starts were a $2.5-billion lithium ion battery factory for Tesla Motors in Reno, Nev., and a $1.3-billion nitrogen urea plant in Enid, Okla.
Other large manufacturing plant projects were a $375-million upgrade to a paper products mill in Brewton, Ala., and a $360-million propane dehydrogenation plant in Mont Belvieu, Texas. If the manufacturing plant category is excluded, nonresidential building in November would have still shown a moderate gain, rising 10%.
The commercial building group in November grew 7%, resuming its upward track after easing back in the previous two months. Hotel construction posted a 15% November gain, featuring the start of the $265-million Mohegan Hotel in Uncasville, Conn., as well as a $126-million hotel in Chicago.
Office construction advanced 7%, lifted by the start of the $254-million Partners HealthCare headquarters in Somerville, Mass., and the $245-million Joint Operations Center for the U.S. Army at Ft. Meade, Md. Both stores and warehouses lost momentum in November, slipping 5% and 7%, respectively.
The institutional building group in November increased 12%, aided by a healthy gain for transportation terminal work, up 221%. The transportation terminal category reflected the start of the $1.6-billion airport terminal redevelopment program in Salt Lake City.
Health care facilities reported a 13% gain in November and included groundbreaking for such projects as the $312-million Emory Hospital Patient Tower in Atlanta and the $276-million Cleveland Clinic Cancer Center in Cleveland. Also showing growth was the public buildings category, improving 12%.
On the negative side, educational facilities slipped 6% in November, although the latest month included the $327-million expansion of the Campus Crossroads project at the University of Notre Dame in South Bend Ind., involving three buildings for classrooms, research and student activities. Weaker activity was also registered by churches, down 18%; and amusement-related facilities, down 36%.
During the first 11 months of 2014, nonresidential building climbed 17% relative to the same period a year ago. Manufacturing plant construction surged 82% year-to-date, pushed upward by the large projects in November as well as numerous energy-related projects that were entered earlier in 2014.
The commercial building group increased 13% year-to-date, featuring gains for hotels, up 28%; office buildings, up 24%; and warehouses, up 15%; while store construction lagged behind with a 1% decline. The institutional building group grew 6% year-to-date, lifted by an 11% increase for educational facilities, which is the largest nonresidential building category by dollar volume. Other gains were reported for amusement-related facilities, up 10%; transportation terminals, up 8%, and public buildings, up 2%. Declines were reported for health care facilities, down 3%; and churches, down 12%.