NEW YORK (September 21, 2017) – At a seasonally adjusted annual rate of $711.6 billion, new construction starts in August slipped 2 percent from July, according to Dodge Data & Analytics. The decline followed July’s 6 percent increase, yet still kept total construction activity 5 percent above the relatively subdued pace reported during the second quarter. The nonbuilding construction sector in August dropped 24 percent after soaring 26 percent in July, reflecting decreased activity for public works and power plants, even with the August start of a $1.3 billion natural gas-fired power plant in California. Residential building in August eased back 1 percent, due to weaker activity for multifamily housing. Nonresidential building was the growth sector in August, climbing 14 percent with the start of two massive projects in New York NY – the $1.6 billion Moynihan Station project and the $1.2 billion Javits Convention Center expansion. For the first eight months of 2017, total construction starts on an unadjusted basis were $481.7 billion, down 1 percent from the same period a year ago. The year-to-date performance for total construction was restrained by a 39 percent drop for the electric utility/gas plant category. If the electric utility/gas plant category is excluded, total construction starts in this year’s first eight months would be up 2 percent from the same period in 2016.
The August data produced a reading of 151 for the Dodge Index (2000=100), compared to the 154 reported in July. The Dodge Index began 2017 on a heathy note, averaging 160 in the first quarter, but then fell 11 percent to 143 in the second quarter. The readings for the Dodge Index in July and August suggest that total construction starts are on track for a partial rebound in the third quarter, although September will reflect some negative impact from Hurricanes Harvey and Irma. “What stands out about the August statistics is the strength shown by the institutional side of nonresidential building, which is consistent with a broader trend that’s taken hold during 2017,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The institutional building segment (which includes such project types as transportation terminals, convention centers, and educational facilities), is providing much of the lift this year to nonresidential building, while the commercial building segment has decelerated after a 20 percent surge in 2016. It’s believed that total construction starts for the U.S. should be able to register growth for 2017 as a whole, helped by this year’s strength for institutional building, notwithstanding the near term disruption to construction activity caused by Hurricane Harvey in the Houston TX area and Hurricane Irma in Florida.”
Nonresidential building in August was $268.3 billion (annual rate), a 14 percent gain that followed a 5 percent decline in July. The institutional building categories as a group soared 27 percent, led by a 174 percent hike by the transportation terminal category. Most of the upward push came from the $1.25 billion rail terminal segment of the $1.6 billion Moynihan Station project in New York NY, which also includes $300 million for office space and $50 million for retail space. This project involves the redevelopment of the James A. Farley Post Office Building into a new train hall with additional office and retail space, expanding the existing Penn Station in Manhattan. Other transportation terminal projects in August included the $229 million Federal Inspection Services facility at San Diego International Airport and $90 million for airport security infrastructure at San Francisco International Airport. The amusement and recreational category also climbed sharply in August, advancing 144 percent with the lift coming from the $1.2 billion expansion to the Jacob K. Javits Convention Center in New York NY. In addition, the educational facilities category increased 39 percent in August, following lackluster activity during the previous three months. Large educational facilities projects that reached groundbreaking in August included a $200 million biology research building at Yale University in New Haven CT and the $153 million Medicine and Heart Health Institute building at the University of South Florida in Tampa FL. There were five K-12 school buildings valued at $50 million or more entered as August starts, located in Brooklyn NY ($93 million and $74 million), Columbia City IN ($65 million), the Bronx NY ($51 million), and Dallas TX ($50 million). On the negative side, healthcare facilities dropped 41 percent in August after jumping 117 percent in July which featured the start of the $1.5 billion Penn Medicine Patient Pavilion in Philadelphia PA. August declines were also reported for public buildings (courthouses and detention facilities), down 12 percent; and religious buildings, down 22 percent.
The commercial categories as a group increased 11 percent in August, bouncing back after a 20 percent decline in July. The office building category registered a 38 percent gain in August, aided by the start of these large projects – a $523 million office campus in Redwood City CA, the $322 million Moffett Towers II office park in Sunnyvale CA, the $300 million office portion of the Moynihan Station project in New York NY, and the $145 million NCR headquarters second office building in Atlanta GA. Hotel construction in August was also up sharply, rising 78 percent after a weak July with the help of these projects – the $342 million hotel portion of the $500 million Resorts World Hotel and Casino (phase 1) in Las Vegas NV, the $224 million Oregon Convention Center Hotel in Portland OR, the $200 million Seminole Hard Rock Tampa hotel tower in Tampa FL, and the $141 million hotel portion of the $226 million Sycuan Hotel and Casino expansion (phase 1) in El Cajon CA. Commercial garage construction improved 6 percent in August, but declines were reported for warehouses, down 12 percent; and stores, down 37 percent. Even with its August decline, the warehouse category included groundbreaking for a $110 million Dollar Tree distribution center in Warrensburg MO and a $92 million Amazon fulfillment center in Salt Lake City UT. The manufacturing plant category in August plunged 41