New Construction Starts in October Climb 13 Percent

NEW YORK, N.Y. — New construction starts in October advanced 13 percent to a seasonally adjusted annual rate of $591.1 billion, according to Dodge Data & Analytics. The increase follows the lackluster performance for construction starts during August and September, when activity fell to the lowest levels reported so far in 2015. Much of October’s gain for total construction was due to a sharp rebound by nonresidential building, with additional support coming from a moderate upturn for housing as the result of further strengthening by multifamily housing. At the same time, the non-building construction sector (public works and electric utilities/gas plants) settled back in October, reflecting a decreased amount of power plant projects. During the first ten months of 2015, total construction starts on an unadjusted basis were $551.9 billion, up 10 percent from the same period a year ago. Leaving out the volatile electric utility and gas plant category, which was boosted in early 2015 by the start of several massive liquefied natural gas terminals, total construction starts during the first ten months of 2015 would be up 4 percent relative to last year.

October’s data raised the Dodge Index to 125 (2000=100), compared to 111 in September. “The healthy increase for construction starts in October alleviates concern about a stalling expansion that may have arisen with the sluggish activity in August and September,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The construction start statistics do show volatility on a month-to-month basis, and as a result trends in the near term are rarely smooth. On balance, though, factors within the economic and political environment still point towards the continued expansion for construction. For the nonresidential building market, the primary drivers for its commercial and institutional building segments remain positive. The U.S. economy continues to register moderate job growth, vacancy rates are receding, rents are rising and construction-related bond measures at the state level are getting passed. For residential building, multifamily housing is still a target for investors while millennials are lifting the demand for apartments. For public works, there’s been solid progress made by Congress towards finalizing the next federal multiyear transportation bill and there’s less uncertainty with the selection of Paul Ryan as the new Speaker of the House of Representatives, although fiscal 2016 appropriations still need to be passed.

Nonresidential building in October jumped 32 percent to $200.7 billion (annual rate) after a weak September, returning activity to the level that was reported back in June following three months of decline. The commercial building categories as a group soared 49 percent in October, reflecting across-the-board gains. Store construction surged 56 percent, pushed upward by the $561-million expansion and renovation of the Westfield Century City Mall in Los Angeles, California.  Office construction advanced 45 percent%, helped by the start of two large data center projects – the $570-million Facebook data center (phase 1) in Ft. Worth , Texas and the $300-million expansion to the Google data center in Lithia Springs, Georgia. More typical office projects that reached groundbreaking in October included a $400-million office building in New York, New York, a $128-million addition and renovation to an office building in Washington, D.C., and a $100-million corporate headquarters in Des Moines, Iowa. Hotel construction grew 28 percent, aided by the start of the $350-million McCormick Place Marriott Marquis Hotel in Chicago, Illinois and the $87-million Renaissance Legacy Hotel in Plano, Texas. Warehouse construction improved 24 percent, supported by the start of the $130-million Dollar Tree distribution center in Cowpens, South Carolina plus two Amazon distribution centers located in San Marcos, Texas ($90 million) and Fall River, Massachusetts ($45 million). And, the garage and service station category contributed to October’s commercial upturn, climbing 119 percent due to the start of two large consolidated rental car facilities located at Chicago’s O’Hare International Airport ($400 million) and San Antonio’s International Airport ($106 million).

The institutional side of the nonresidential building market climbed 23 percent in October. The educational facilities category increased 21 percent, led by the start of the $285-million Rockefeller University River Campus in New York, New York and a $70-million science lab at the University of Tennessee in Knoxville, Tennessee. October also featured the start of several large high schools, including projects located in Cypress, Texas ($120 million), Frisco, Texas ($86 million) and Charleston, South Carolina ($64 million). Healthcare facilities in October rose 18 percent, as three projects valued in excess of $100 million reached groundbreaking — a $160-million hospital addition in Phoenix, Arizona, a $139-million hospital addition in Livingston, New Jersey and a $138-million medical center in O’Fallon, Illinois. Of the smaller institutional categories, October gains were registered by public buildings, up 25 percent; amusement-related work, up 17 percent and churches, up 5 percent. Transportation terminal work was the one institutional category to report an October decline, sliding 5 percent. The manufacturing building category also lost momentum in October, retreating 15 percent, although the latest month did include the start of an $80-million manufacturing facility for Kubota in Gainesville, Georgia.