New construction starts in June grew 4% from the previous month to a seasonally adjusted annual rate of $679.9 billion, according to Dodge Data & Analytics.  Nonresidential building increased 13% in June, strengthening after two months of lackluster activity, and the nonbuilding construction sector rose 8% with the help of elevated activity for electric utilities.  

However, residential building slipped 4% in June, as both sides of the housing market (single family and multifamily) retreated. Through the first six months of 2017, total construction starts on an unadjusted basis were $342.7 billion, down 4% from the same period a year ago. If the manufacturing plant and electric and utility gas plant categories are excluded, total construction starts during the first half of 2017 would be up 1% from last year.

June’s data lifted the Dodge Index to 144 (2000=100), compared to 138 for May.  Even with June’s improved activity, the Dodge Index averaged 139 for the second quarter, down 10% from the first quarter’s 154 average.

Since last year, total construction starts have shown an up-and-down pattern on a quarterly basis, including a 6% decline in the fourth quarter of 2016, which was then followed by a 7% increase in this year’s first quarter and now a 10% decline in the second quarter.  

“A maturing construction expansion is characterized by deceleration in the overall rate of growth; that’s often accompanied by up-and-down behavior on a quarterly or monthly basis,” said Robert A. Murray, chief economist for Dodge Data & Analytics.  

“The 11% to 12% yearly increases for total construction starts during the 2012-2015 period were followed by a 4% gain in 2016, and several factors suggest that 2017 should still see modest growth for the year as a whole. These factors include commercial vacancy rates that remain low, as well as greater construction funding coming from the state and local bond measures passed in recent years.

“At the same time, it’s become apparent that any impact from a new federal infrastructure program, should one get passed during the latter half of 2017, would benefit construction more in 2018 and 2019,” Murray said.

“The first half of 2017 has seen nonresidential building advance, reflecting further growth for office buildings and warehouses, combined with the boost coming from the start of several massive airport terminal projects such as the $3.4-billion Central Terminal Building at LaGuardia Airport in New York City,” Murray added.  

“Residential building so far in 2017 has been mixed, with some growth for single-family housing earlier this year, while multifamily housing appears now to be trending downward after peaking in 2016.  

“Public works construction has been sluggish so far in 2017, although on the plus side it’s received support from the start of several huge pipeline projects, including the $4.2-billion Rover natural gas pipeline located in Michigan, Ohio, West Virginia and Pennsylvania.

“On balance, the volume of construction starts so far in 2017 is slightly ahead of last year, if one excludes the often-volatile manufacturing building and electric utility and gas plant project types,” Murray said.

Nonresidential Building

Nonresidential building in June was $249.6 billion (annual rate), up 13% from May. The commercial categories as a group climbed 23%, led by an 83% surge for new office building starts.

There were eight office projects valued at $100 million or more that reached groundbreaking in June, led by a $585-million Facebook data center in the Omaha, Neb., area, the $400-million office portion of the $500-million renovation of the Willis Tower in Chicago (involving remodeling of the structure’s base and observation deck), and the $334-million office portion of the $600-million Diridon Station mixed-use complex in San Jose, Calif.  

During the first half of 2017, the top five metropolitan areas ranked by the dollar volume of office construction starts were: New York City, San Francisco, Washington, D.C., Dallas-Ft. Worth and Atlanta.

The first half of 2017 ranking for those metropolitan areas helped by the three largest June office projects were: Chicago, #6; Omaha, #10; and San Jose, #12.  

Hotel construction in June jumped 62%, boosted by the start of the $575-million hotel portion of the $900-million Seminole Hard Rock Hotel and Casino expansion in Hollywood, Fla., and the $175-million hotel portion of the $350-million Hard Rock Hotel and Casino renovation in Atlantic City, N.J.  

The other commercial categories lost momentum in June, with stores and shopping centers down 2%, warehouses down 19% and commercial garages down 31%.  The manufacturing building category in June increased 35%, lifted by the start of a $1.8-billion methane plant in Louisiana, as well as groundbreaking for such projects as a $150-million pyrogenic silica plant in Tennessee and a $143-million pharmaceutical research laboratory in Missouri.

The institutional categories as a group were unchanged in June compared to May.  On the plus side, educational facilities rose 16% in June, led by the $160-million renovation of the Martin Luther King Jr. Memorial Library in Washington, D.C., a $125-million high school in Stratford, Conn., and a $114-million high school in Millville, N.J.  

The amusement and recreational category surged 58% in June, reflecting the start of the $193-million renovation of the Philips Arena in Atlanta, the $175-million casino portion of the Hard Rock Hotel and Casino renovation in Atlantic City, N.J., and the $156-million casino portion of the Seminole Hard Rock Hotel and Casino expansion in Hollywood, Fla.  

The public buildings category (courthouses, detention centers) and transportation terminals also contributed with June gains, rising 16% and 10% respectively.  However, health care facilities plunged 39% in June, pulling back after a 40% hike in May. The religious buildings category also retreated in June, falling 38%.

Nonbuilding Construction

Nonbuilding construction, at $155.4 billion (annual rate), increased 8% in June.  The electric utility and gas plant category ran counter to its generally declining trend this year, with June soaring 78%. Large electric utility projects included as June starts were a $1.3-billion natural gas-fired power plant in Florida, a $1.1-billion wind farm and transmission line in Colorado, and a $296-million wind farm in Texas.  

The public works categories as a group dropped 6% in June, making a partial retreat after a 26% jump in May. The miscellaneous public works category, which includes such diverse project types as sitework, pipelines and mass transit, fell 16% in June. Although June included $1.4 billion for work on the high-speed rail line project in central California, May featured the start of several large natural gas pipeline projects, such as the $1.5-billion Revolution

Pipeline expansion in western Pennsylvania and the $690-million Gulf South Coastal Bend Header Pipeline in Texas.  

Highway and bridge construction in June decreased 7%, although the latest month did include the $396-million Interstate 95 Scudder Falls Bridge replacement project over the Delaware River in New Jersey and Pennsylvania. During the first half of 2017, the top five states in terms of the dollar amount of new highway and bridge construction starts were: California, Florida, Texas, Pennsylvania and Georgia.

Two of the environmental public works categories registered gains in June, with water supply construction up 37% and river and harbor development up 14%. The river and harbor development category was boosted by $350 million for Superfund remedial action at the New Bedford, Mass., harbor. Sewer construction, the third environmental public works category, receded 1% in June.

Residential Building

Residential building was $274.9 billion (annual rate) in June, down 4%. Single-family housing slipped 4%, continuing to settle back in June from the strengthening that took place during the first two months of 2017. June’s pace for single-family housing was still 3% above the average monthly amount reported during 2016.  

By region, the first half of 2017 showed this performance for single-family housing compared to last year: the South Atlantic, up 13%; the South Central, up 8%; the Midwest, up 7%; the West, up 5%; and the Northeast, up 1%.  

Multifamily housing in June dropped 7%, sliding back for the third month in a row. Large multifamily projects that reached groundbreaking in June were led by a $287-million apartment complex in Anaheim, Calif., a $185-million apartment building in New York City, and a $164-million condominium complex in Pompano Beach, Fla.  

Through the first half of 2017, the top five metropolitan areas ranked by the dollar amount of multifamily starts were: New York City, Los Angeles, Chicago, San Francisco and Washington, D.C.  

Metropolitan areas ranked six through 10 were: Atlanta, Miami, Philadelphia, Boston and Seattle. The New York City metropolitan area, while still the largest multifamily construction market in the nation, dropped 23% during the first half of 2017 compared to last year, which follows the 29% decline reported for all of 2016.  

Other metropolitan areas in the top 10 with reduced multifamily construction in the first half of 2017 relative to last year were: Chicago, Miami, Boston and Seattle.

The 4% decline for total construction starts on an unadjusted basis during the January-June period of 2017 was due to reduced activity for nonbuilding construction, while residential building was flat and nonresidential building experienced moderate growth.

Nonbuilding construction year-to-date fell 22%, with electric utilities and gas plants down 60% and public works down 4%.  The “no change” for residential building year-to-date was the result of an 8% increase by single-family housing, offsetting an 18% slide by multifamily housing.  

Nonresidential building year-to-date advanced 6%, with institutional building up 11% while commercial building held steady, combined with a 13% increase for manufacturing building that marks a change from this category’s steep retrenchment during 2015 and 2016.  

By major region, total construction starts during the first six months of 2017 showed this pattern: the South Atlantic, up 11%; the West, unchanged; the Northeast, down 5%; the South Central, down 13%; and the Midwest, down 16%. The 13% year-to-date decline in the South Central reflected in part the comparison to the first half of 2016 that included $6.2 billion for two liquefied natural gas terminals, while the 16% year-to-date decline in the Midwest reflected in part the comparison to the first half of 2016 that included the $3.8-billion Dakota Access pipeline.