Dodge: April construction starts retreat 13 percent with pullback in public works

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The value of new construction starts in April dropped 13 percent from the previous month to a seasonally adjusted annual rate of $647.8 billion, according to Dodge Data & Analytics.

The decline followed three straight months of gains, which saw total construction activity rising 20 percent from the lackluster amount reported back in December.

Much of April’s slide for total construction reflected a steep 39 percent plunge by its nonbuilding construction sector, which had been lifted in March by the start of two large pipeline projects – the $4.2 billion Rover natural gas pipeline in Ohio and Michigan, and the $2.5 billion Mariner East 2 propane and natural gas liquids pipeline in Pennsylvania.

Meanwhile, residential building slipped a more moderate 5 percent in April, and nonresidential building receded only a slight 1 percent as it basically held steady with its pace in February and March.

During the first four months of 2017 total construction starts on an unadjusted basis were $213.9 billion, down 4 percent  from last year’s January-April period. If the volatile manufacturing plant and electric utility/gas plant categories are excluded, total construction starts during the first four months of 2017 would be up 4 percent compared to last year.

April’s data lowered the Dodge Index to 137 (2000=100), compared to 157 for March and the 152 average for the first quarter of 2017, yet still above December’s 131.

“The construction start pattern so far in 2017 can be characterized as three steps forward and one step back, as the often hesitant pattern of the construction expansion continues,” Robert A. Murray, chief economist for Dodge Data & Analytics, said in a statement.

“The first three months of this year drew support from a number of very large projects, most notably several massive pipeline and airport terminal projects,” Murray said. “While April did include groundbreaking for the $1.3 billion Oceanwide Center mixed-use complex in San Francisco CA, comprised of two high-rise towers, the boost from very large projects in April was generally less than what occurred during the first three months of this year.

“In addition, both residential building and public works had been trending upward through March, but then experienced a pause in April. In contrast, nonresidential building in April was able to remain essentially stable. On the plus side for construction, Congress in early May passed a continuing resolution for fiscal 2017 appropriations that includes a small increase for highway spending, bringing it up to levels called for by the FAST Act (the multiyear federal transportation legislation). And, long-term interest rates have steadied for the time being, following the increases that were reported in late 2016 and early 2017.”

Nonbuilding construction was $119.0 billion (annual rate) in April, down 39 percent from its heightened March amount. Nonbuilding construction had registered steady growth during the first three months of 2017, with March activity up 16 percent from nonbuilding’s average pace during 2016. The public works categories as a group plunged 48 percent in April, with much of the decline coming from an 83 percent slide for the miscellaneous public works category, which includes such diverse project types as pipelines, mass transit, outdoor sports stadiums, and site work.

Miscellaneous public works in March had included the $4.2 billion Rover natural gas pipeline in Ohio and Michigan, the $2.5 billion Mariner East 2 pipeline in Pennsylvania that will transport propane and other natural gas liquids, and the $300 million stadium for the DC United soccer team in Washington DC. By contrast, the largest miscellaneous public works project entered as an April start was a $200 million portion of the Sound Transit East Link light rail project in Seattle WA.

Sewer construction also experienced a sharp April decline, falling 41 percent. Highway and bridge construction in April fell 10 percent, retreating from its improved volume in March.

The top five states in terms of the dollar amount of highway and bridge construction starts in April were Florida, Ohio, Texas, Iowa, and Pennsylvania. On the plus side for public works, April gains were reported for water supply construction, up 9 percent; and river/harbor development, up 10 percent with the help of a $200 million ferry dock project in Seattle WA. The electric utility/gas plant category in April climbed 71 percent from a weak March, aided by the start of six large wind farms located in these states – Ohio ($450 million), Texas ($342 million), Illinois ($315 million), Iowa ($255 million and $252 million), and New York ($156 million).

Residential building, at $295.4 billion (annual rate), settled back 5 percent in April. Single family housing slipped 6 percent in April, retreating for the second month in a row after showing modest improvement during the fourth quarter of 2016 and the first two months of 2017. April’s pace for single family housing was still 5 percent above the average monthly pace during 2016.

There were seven multifamily projects valued at $100 million or more that reached groundbreaking in April, led by the $387 million multifamily portion of San Francisco’s Oceanwide Center, the $349 million multifamily portion of the $500 million One Beverly Hills mixed-use complex in Beverly Hills CA, and the $280 million One South Halstead apartment tower in Chicago IL.

In April, the top five metropolitan areas in terms of the dollar amount of multifamily starts were the following, in order – San Francisco CA, Los Angeles CA, New York NY, Chicago IL, and Washington DC. Through the first four months of 2017, the top five metropolitan areas were the same, although with this order – New York NY, Los Angeles CA, Chicago IL, Washington DC, and San Francisco CA.

Nonresidential building in April was $233.4 billion (annual rate), down 1 percent from March. The commercial building categories as a group were up 6 percent in April, led by a 24 percentincrease for office buildings. There were five office building projects valued at $100 million or more that reached groundbreaking in April, led by the $780 million office portion of San Francisco’s Oceanwide Center, the $321 million office portion of a $420 million office and retail high-rise in Charlotte NC, and a $300 million Facebook data center in Fort Worth TX.

The institutional categories as a group fell 16 percent in April. Much of the downturn came from an 85 percent plunge for the transportation terminal category, which had been lifted in March by the start of two projects at Los Angeles International Airport – the $1.9 billion Delta relocation to Terminals 2 and 3, and the $961 million Midfield Satellite Concourse North (phase 1).

On the plus side, educational facilities increased 12 percent, helped by large high school projects in Snoqualmie WA ($156 million) and Billerica MA ($141 million), as well as groundbreaking for Columbia University’s $150 million new business school facility in New York NY. April gains were also reported for religious buildings, up 43%; and amusement-related construction, up 50%. The amusement category was lifted by the start of the $390 million Dickies Arena in Fort Worth TX and the $200 million Vessel at Hudson Yards in New York NY, which is a 150-foot tall interconnected stairway that’s located in a five-acre plaza at the Hudson Yards development.

The 4 percent downturn for total construction starts on an unadjusted basis during the January-April period of 2017 came as the result of a mixed performance by major sector. Nonbuilding construction dropped 21 percent year-to-date, with electric utilities/gas plants down 68 percent while public works climbed 5 percent (reflecting the sharp gains for pipeline projects in early 2017).

Added perspective is made possible by looking at 12-month moving totals, in this case the 12 months ending April 2017 versus the twelve months ending April 2016. On this basis, total construction starts were up 3 percent.