New construction starts in December climbed 12% to a seasonally adjusted annual rate of $733.3 billion, bouncing back following November’s 12% decline, according to Dodge Data & Analytics.
December’s gain for total construction reflected varied improvement by each of the three main construction sectors. Nonbuilding construction (public works and electric utilities/gas plants) jumped 43%, lifted by the start of the $2.3 billion I-66 Corridor Improvements Project in northern Virginia. Nonresidential building rose 10%, aided by the start of two large data center projects, while residential building edged up 1%. or all of 2017, total construction starts grew 3% to $745.9 billion, which followed the 6% increase reported for 2016. The full year 2017 gain was dampened by a 35% downturn for the electric utility/gas plant category. If electric utilities and gas plants are excluded, total construction starts for 2017 would be 5% higher than the corresponding amount for 2016.
The December statistics produced a reading of 155 for the Dodge Index (2000=100), up from November’s 138. For the full year 2017, the Dodge Index averaged 158.
“After weaker activity was reported in both October and November, the December rebound for total construction starts eased the extent of the decline that took place during the fourth quarter,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “On a quarterly basis, growth in 2017 was reported during the first and third quarters, while activity retreated during the second and fourth quarters, continuing the up-and-down pattern around an upward trend that was present during 2016. On the positive side for 2017, institutional building assumed a leading role in keeping the nonresidential building expansion going, reflecting elevated activity for transportation terminal starts and further improvement by educational facilities. Manufacturing plant construction starts strengthened, ending a two-year decline, and commercial building was able to stay close to its heightened 2016 amount. Residential building in 2017 showed more growth for single family housing, offsetting a downturn for multifamily housing. And, public works construction in 2017 was able to strengthen, helped by the start of several very large pipeline projects and a moderate gain for highway and bridge construction.”
“The construction industry over the past two years has made the transition to a more mature stage of expansion, characterized by slower rates of growth for total construction compared to the 11% to 13% yearly gains during the 2012-2015 period,” Murray said. “For 2018, the construction expansion is anticipated to continue at a modest pace. The tax reform package is expected to provide a near term lift to overall economic growth, and the likely beneficiaries would be commercial building and multifamily housing. Funding support for institutional building will come from the state and local bond measures passed in recent years. Passage of a new infrastructure program at the federal level could be a plus for public works, although the impact at the construction site is likely to be felt more in 2019 than in 2018, as the program would feature incentives to boost funding from state, local, and private sources.”
Residential building in December was $308.1 billion (annual rate), up 1%. The single family side of the housing market rose 1%, continuing to show the modest improvement that’s been present during the second half of 2017 after the slight loss of momentum reported last spring. Multifamily housing in December was unchanged from its November pace. December featured groundbreaking for four large multifamily projects valued each at $100 million or more – the $224 million multifamily portion of a $380 million mixed-use building in San Francisco CA, a $220 million apartment building in New York NY, the $217 million multifamily portion of a $275 million mixed-use building in San Diego CA, and a $123 million apartment building in Minneapolis MN.
The 2017 amount for residential building was $302.0 billion, a 2% gain that followed a 9% increase in 2016. Single family housing maintained its moderate upward track, rising 8% which matched its rate of growth in dollar terms for 2016. By geography, single family housing in 2017 showed this pattern for the five major regions – the South Atlantic, up 12%; the South Central and West, each up 8%; the Midwest, up 5%; and the Northeast, down 2%.
Multifamily housing in 2017 headed in the opposite direction, falling 12% after seven straight years of expansion. New York NY, the nation’s leading multifamily market by dollar volume, registered a relatively modest 4% decline in 2017, after sliding a substantial 27% in 2016. However, the pullback for multifamily housing broadened on a geographic basis during 2017, as 7 of the remaining 9 metropolitan markets in the top ten showed weaker activity, with only San Francisco CA and Atlanta GA reporting gains. Rounding out the top five multifamily markets by the 2017 dollar volume, with their percent change from 2016, were the following – Los Angeles CA, down 17%; Washington DC, down 23%; Chicago IL, down 24%; and San Francisco CA, up 3%. Multifamily markets ranked 6 through 10 showed this performance – Boston MA, down 29%; Atlanta GA, up 26%; Miami FL, down 50%; Seattle WA, down 10%; and Dallas-Ft. Worth TX, down 26%.
