September Construction Falls 7%
New York, N.Y. – October 18, 2010 – New construction starts in September retreated 7% to a seasonally adjusted annual rate of $405.2 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonbuilding construction, which is comprised of public works and electric utilities, pulled back following the strong activity reported over the summer. Meanwhile, both nonresidential building and housing were able to show some improvement in September after their loss of momentum in the preceding month. For the January-September period of 2010, total construction on an unadjusted basis came in at $314.6 billion, down 3 percent from a year ago.
The September statistics lowered the Dodge Index to 86 (2000=100), compared to 92 in August. From early 2009 through the present, the Dodge Index has stayed within the range of 81 to 95. “The monthly pattern shows that construction starts have essentially stabilized at a low level, but have not yet reached the point where renewed expansion is taking hold,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “For various reasons, a sustained upturn for overall construction activity remains several quarters away. The lift that had been provided to the public works sector from the stimulus funding is now subsiding. Vacancy rates for commercial properties remain high, and will be slow to recede given the weak employment picture. The tough fiscal climate for states and localities is making it more difficult for institutional projects to go ahead. And, the freeze on home foreclosures may well extend the time needed to correct the imbalances in the housing sector.”
Nonbuilding construction in September plunged 27% to $126.1 billion (annual rate), dropping back after large gains in July (up 25%) and August (up 23%). The environmental public works categories showed decreased contracting in September, with river/harbor development down 44%, sewers down 37%, and water supply systems down 3%. The decline for the water supply category was cushioned by the start of a $359 million water treatment plant in Austin TX. The “miscellaneous” public works category, which includes such diverse project types as pipelines and mass transit, dropped 70% following an August which included $3 billion related to work on a natural gas pipeline in Wyoming, Utah, Nevada, and Oregon. By contrast, the largest project for the miscellaneous public works category in September was $120 million for light rail work in St. Paul MN.
Highway construction in September was unchanged from August, while bridge construction edged up 2% with the help of a $182 million bridge rehabilitation project in Brooklyn NY. Electric utility construction in September advanced 5% on top of an already strong amount in August. September included the start of five large wind farms, located in Idaho ($500 million), Illinois ($250 million), North Dakota ($150 million), Iowa ($150 million), and Nebraska ($90 million). Also contributing to September’s strong electric utility total was the start of two large gas-fired power plants, valued each at $350 million, located in California and New Jersey.
Nonresidential building, at $162.4 billion (annual rate), climbed 8% in September. The office category grew 21%, aided by the start of a $290 million corporate headquarters in Melville NY, a $146 million office building in Gaithersburg MD, and $104 million for the office portion of a judicial center in Denver CO. Hotel construction improved 21% in September from very low activity in August, while store construction advanced 7% with groundbreaking for a $50 million outlet shopping center in Oklahoma City OK. Despite their September gains, all three commercial categories on a year-to-date basis continued to lag behind last year, with stores down 10%, offices down 25%, and hotels down 38%. Warehouse construction in September lost further momentum, falling 18%. The manufacturing plant category in September jumped 58%, reflecting the boost coming from $1.6 billion for an oil refinery expansion in Port Arthur TX, a project which earlier in 2009 had been put on hold.
On the institutional side of the nonresidential market, gains were reported in September for several of the smaller institutional categories. Transportation terminals surged 73%, helped by $300 million for airport terminal work at San Diego International Airport and $65 million for mass transit terminal work in St. Paul MN. The amusement category in September increased 34%, boosted by a $400 million renovation project at the Javits Convention Center in New York NY. The public buildings category in September grew 20%, aided by a $108 million renovation to a federal building in Newark NJ (a project that received federal stimulus funding). The two largest institutional categories, educational buildings and healthcare facilities, retreated in September, with educational buildings down 13% and healthcare facilities down 3%. Even with its September drop, the educational building category included groundbreaking for a $142 million library in San Diego CA, plus two large museum projects located in San Francisco CA ($130 million) and Dallas TX ($83 million).
Residential building in September grew 6% to $116.7 billion (annual rate). Single family housing edged up 1%, but its pace in September was still 16% below its average for the first four months of this year. On a year-to-date basis, single family housing was up 11% in dollar terms compared to last year, although the lead in recent months has been shrinking. At the regional level, the year-to-date change for single family housing was the following – the Northeast and South Atlantic, each up 16%; the Midwest, up 12%; the West, up 11%; and the South Central, up 5%. Murray noted, “The increase for single family housing this year is turning out to be smaller than previously estimated, given the dislocation caused by the expiration of the homebuyer tax credits plus the uncertainty created by this fall’s freeze on foreclosures.” Multifamily housing in September climbed 30%, regaining the levels registered at the start of the year after decreased contracting over the past three months. Large multifamily projects that were reported as starts in September included the $100 million renovation of an apartment complex in Brooklyn NY (a project that received federal stimulus support), plus a $75 million condominium tower in Dallas TX.
The 3% decline for total construction on an unadjusted basis during the first nine months of 2010 was the result of varied behavior by major sector. Nonresidential building fell 11% year-to-date, with commercial building down 20%, manufacturing building down 16%, and institutional building down 7%. Nonbuilding construction in the first nine months of 2010 slipped 3%, with public works down 1% while electric utilities dropped 11%. Residential continued to be the one major sector able to show year-to-date growth, advancing 10%. By geography, total construction during the first nine months of 2010 revealed an increase for one region – the Northeast, up 7%. Total construction in the Midwest held steady with a year ago, while total construction declines were reported for the South Central, down 3%; the West, down 6%; and the South Atlantic, down 10%.
September 2010 Construction Starts
SEPTEMBER 2010 CONSTRUCTION STARTSMONTHLY SUMMARY OF CONSTRUCTION STARTSPrepared by McGraw-Hill Construction Research & AnalyticsMonthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of DollarsThe Dodge Index
(2000=100, Seasonally Adjusted)
September 2010...................................86
August 2010..........................................92YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars
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