March Construction Starts Surge 16 Percent

New construction starts in March advanced 16% from the previous month to
a seasonally adjusted annual rate of $809.2 billion, according to Dodge
Data & Analytics. The substantial gain followed a lackluster performance
during the first two months of 2019, as total construction starts in
March were able to climb back to a level slightly above the average
monthly pace during 2018. The nonbuilding construction sector, comprised
of public works and electric utilities/gas plants, jumped 40% in March
from a weak February, lifted by the start of a $4.3 billion liquefied
natural gas (LNG) export terminal in Cameron LA. Nonresidential building
increased 24% in March, aided by groundbreaking for several large
projects. These included the $1.6 billion Toyota-Mazda automotive
manufacturing facility in Huntsville AL, a $1.1 billion hotel and
theater redevelopment in New York NY, and the $850 million renovation of
the KeyArena in Seattle WA. In contrast, residential building slipped 3%
in March, as multifamily housing retreated for the second consecutive
month. During the first three months of 2019, total construction starts
on an unadjusted basis were $164.5 billion, down 10% from the same
period a year ago. On a twelve-month moving total basis, total
construction starts for the twelve months ending March 2019 essentially
matched the corresponding amount for the twelve months ending March 2018.

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The March data produced a reading of 171 for the Dodge Index (2000=100),
up from 148 in February, and 1% higher than the full year 2018 average
for the Dodge Index at 170. At the same time, the Dodge Index during the
first quarter of 2019 dropped 6% from the fourth quarter of 2018, as it
was pulled down by the sluggish volume of construction starts during
January and February.

“The month-to-month pattern for construction starts is often affected by
the presence or absence of very large projects, and March certainly
benefitted from groundbreaking for a number of very large projects,”
stated Robert A. Murray, chief economist for Dodge Data & Analytics. “It
remains true that the construction expansion is decelerating, but the
March upturn indicates that the loss of momentum won’t be as pronounced
as suggested by the subdued activity in January and February. It’s still
expected that the overall dollar amount for construction starts for 2019
will be able to stay close to what was reported for 2018. On the plus
side, the passage of federal appropriations for fiscal year 2019 in
mid-February seems to be helping the public works sector. The electric
utility and gas plant category has shown surprising strength during
early 2019, following the steep declines over the previous three years.
The commercial building segment is supported by market fundamentals that
have yet to erode, while the institutional building segment continues to
move at a good clip. The areas of concern in the near term relate to
residential building, with single family housing not able to strengthen
due to affordability constraints while multifamily housing seems to be
pulling back from its strong 2018 pace.”

Nonbuilding construction in March increased 40% to $214.7 billion
(annual rate), following four straight months of decline that saw
activity drop a combined 19%. The electric utility and gas plant
category soared 116%, led by the inclusion of the $4.3 billion Calcasieu
Pass LNG export terminal project in Cameron LA as a March construction
start. Gas plant-related construction starts (primarily LNG export
terminals) had reached a peak back in 2015 at $26.2 billion, but then
plunged to only $0.6 billion by 2017 before rebounding to $5.1 billion
in 2018. The Calcasieu Pass LNG export terminal project should
contribute to another increase for gas plant-related construction starts
in 2019. If this massive project is excluded from the March statistics,
the electric power and gas plant category would have fallen 76% from
February, but gains would still have been shown by nonbuilding
construction, up 7%; and total construction, up 9%. The public works
categories as a group climbed 21% in March, rebounding after a 14% slide
in February. Miscellaneous public works (which includes such diverse
project types as site work, pipelines, and rail transit) jumped 84%
after a weak February, led by such projects as a $312 million segment of
the border wall in south Texas and a $283 million upgrade to a train
control signal system in Brooklyn NY. Highway and bridge construction
starts in March grew 4%, showing improvement after declines in January
(down 5%) and February (down 6%). The top five states for highway and
bridge construction starts in March, ranked by dollar volume, were –
Texas, California, Pennsylvania, Florida, and North Carolina. The
environmental public works categories showed a varied performance in
March, with gains for dams/river harbor development, up 62%; and water
supply construction, up 4%; but a decline for sewer construction, down
7%.

Nonresidential building in March advanced 24% to $303.3 billion
(annual rate), as widespread growth by project type enabled this sector
to reach its highest amount since last October. The manufacturing plant
category jumped 108%, lifted by the start of the $1.6 billion
Toyota-Mazda automotive manufacturing facility in Huntsville AL. The
next two largest manufacturing plants entered as March construction
starts were a $200 million rocket engine plant in Huntsville AL and a
$100 million poultry processing plant in Humboldt TN. The commercial
categories as a group increased 20% in March, registering the third gain
in a row after very weak activity back in December. Hotel construction
climbed 60%, led by the $850 million hotel portion of a $1.1 billion
hotel and theater redevelopment project located in Times Square New York
City. Additional large hotel projects that reached groundbreaking in
March were the $233 million hotel portion of the $950 million Grand
Avenue mixed-use high-rise complex in Los Angeles CA and a $187 million
beach resort hotel in Oceanside CA. Office construction increased 45% in
March, with seven projects valued at $100 million or more. These
included two large data centers – a $750 million Facebook data center in
Sandston VA and a $300 million CloudHQ data center in Ashburn VA. Also
reaching the construction start stage in March were two large office
projects in Atlanta GA – the $550 million Norfolk Southern headquarters
building and the $314 million office portion of a $470 million mixed-use
development. Store construction in March grew 11%, helped by the $150
million retail portion of the $1.1 billion hotel and theater
redevelopment in Times Square. Commercial garage construction in March
edged up 2%, but warehouse construction retreated 29% after its elevated
February amount.

The institutional side of nonresidential building grew 17% in March,
picking up the pace after basically flat activity during the previous
three months. Amusement-related construction starts jumped 90%,
reflecting the $850 million renovation of the KeyArena in Seattle WA
that will be home to an NHL team and potentially an NBA team. The $150
million theater portion of the $1.1 billion hotel and theater
redevelopment project in Times Square also lifted the amusement-related
category in March. Educational facilities, the largest institutional
category, grew 6% in March. Large projects that boosted the educational
facility category were a $500 million research laboratory for the U.S.
Department of Energy in Idaho Falls ID, a $173 million high school in
Worcester MA, and a $129 million science building at San Jose State
University in San Jose CA. Healthcare facilities edged up 2% in March,
helped by the start of a $310 million hospital at the University of
Pittsburgh Medical Center in Pittsburgh PA. The other institutional
project types showed mixed behavior in March – public buildings up 48%
after a weak February, religious buildings up 7%, and transportation
terminals down 22%.

Residential building in March dropped 3% to $291.2 billion
(annual rate), retreating for the second month in a row. Multifamily
housing fell 12% in March, with the level of activity coming in 20%
below the average monthly pace reported during 2018. There was one very
large project entered as a March construction start – the $511 million
multifamily portion of the $950 million Grand Avenue mixed-use high-rise
complex in Los Angeles CA. There were five additional multifamily
projects valued at $100 million or more that were entered as March
construction starts, including the $165 million One Boerum Place
condominium high-rise in Brooklyn NY and the $145 million multifamily
portion of a $300 million mixed-use high-rise complex in West Palm Beach
FL. The top five metropolitan areas ranked by the dollar amount of
multifamily starts in March were – New York NY, Los Angeles CA, Miami
FL, Washington DC, and Minneapolis-St. Paul MN. Single family housing in
March edged up 1% from the previous month, although its March level of
activity was still 7% below the average monthly pace reported during
2018. By geography, single family housing showed this pattern for March
relative to February – the Northeast, up 5%; the West, up 4%; the South
Central, up 3%; the South Atlantic, down 1%; and the Midwest, down 2%.

The 10% decline for total construction starts on an unadjusted basis
during this year’s January-March period was due to decreased activity
for all three main sectors compared to last year. Residential building
fell 15% year-to-date, with single family housing down 12% and
multifamily housing down 23%. Nonbuilding construction dropped 6%
year-to-date, as a 23% slide for public works was partially offset by a
161% hike for electric utilities/gas plants. Nonresidential building
retreated 5% year-to-date, with respective declines of 30% and 10% for
manufacturing plants and institutional building while commercial
building was able to register a 6% gain. By major region, total
construction starts for the first three months of 2019 showed this
performance versus last year – the Midwest, down 24%; the South Atlantic
and the West, each down 12%; the Northeast, down 6%; and the South
Central, up 2%.

Additional perspective comes from looking at twelve-month moving totals,
in this case the twelve months ending March 2019 versus the twelve
months ending March 2018. On this basis, total construction starts for
the most recent twelve months held steady with the amount of the
previous period. By major sector, nonresidential building increased 2%,
with manufacturing building up 9%, commercial building up 7%, and
institutional building down 3%. Residential building grew 1%, with
single family housing up 1% while multifamily housing was unchanged.
Nonbuilding construction dropped 4%, with public works down 5% and
electric utilities/gas plants down 1%.

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