NEW YORK, N.Y. – At a seasonally adjusted annual rate of $636.7 billion, new construction starts in May increased 5 percent from April, according to Dodge Data & Analytics. Much of the growth came from the non-building construction sector (public works and electric utilities), which was lifted by a $3.8-billion oil pipeline in the upper Midwest, as well as by seven power plant projects with a combined cost of $4.3 billion. Residential building edged up slightly in May, as multifamily housing bounced back from its subdued April performance.
However, nonresidential building in May retreated, sliding for the second month in a row after the elevated activity reported in March. During the first five months of 2016, total construction starts on an unadjusted basis were $256.7 billion, down 12 percent from the same period a year ago. Last year’s January-May period featured 12 exceptionally large projects valued each at $1 billion or more, including a $9.0-billion liquefied natural gas export terminal in Texas, an $8.5- billion petrochemical plant in Louisiana, the $2.5-billion 30 Hudson Yards office tower in New York, New York and the $2.3-billion Interstate 4 Ultimate Project in Orlando, Florida. In contrast, the January-May period of 2016 included only four projects valued at $1 billion or more. If these exceptionally large projects are excluded from the comparison, total construction starts during the first five months of 2016 would be down 0.3 percent, or essentially even, with last year.
The May statistics raised the Dodge Index to 135 (2000=100), up from 129 in April. The Dodge Index had shown moderate improvement during February and March, averaging 141, before slipping back in April.
Nonresidential building in May decreased 6 percent to $171.2 billion (annual rate), marking the second straight monthly decline after the heightened activity in March. The commercial building categories as a group experienced a 9 percent shortfall in May. Hotel construction, which had been particularly strong during the initial months of 2016, fell 22 percent. Office construction in May dropped 11 percent, and both stores and warehouses stayed close to their April levels, posting small declines of 1 percent and 3 percent respectively. The manufacturing plant category in May retreated 37 percent, following April’s 38 percent hike.
The institutional side of the nonresidential building market held steady in May. The educational facilities category rose a moderate 4 percent. Healthcare facilities increased 7 percent and moderate growth was reported for church construction, up 6 percent; and public buildings (courthouses and detention facilities), up 9 percent. On the negative side, transportation terminal work slipped 9 percent in May, and amusement-related construction fell 13 percent.
The 12 percent decline for total construction starts on an unadjusted basis during the first five months of 2016 was due to diminished activity for both non-building construction and nonresidential building, compared to their brisk pace of a year ago. Non-building construction dropped 24 percent year-to-date, with public works down 13 percent and electric utilities/gas plants down 39 percent. Nonresidential building fell 21 percent year-to-date, with commercial building down 7 percent, institutional building down 12 percent and manufacturing building down 70 percent. Residential building continues to be the one major sector that’s showing year-to-date growth, climbing 6 percent with single-family housing up 9 percent and multifamily housing holding steady with the prior year. By geography, total construction starts during the first five months of 2016 revealed a mixed pattern – the South Central, down 36 percent; the Northeast, down 8 percent; the West, down 2 percent; the South Atlantic, no change and the Midwest, up 7 percent.