Lexington, MA - July 25, 2007
- New construction starts in June advanced 8% to a seasonally adjusted annual rate of $662.4 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonresidential building registered an especially strong performance in June, surging 29%, while residential building improved a moderate 4% as the result of a pickup for multifamily housing. At the same time, nonbuilding construction (public works and electric utilities) settled back 12% after its very strong May amount. For the first six months of 2007, total construction on an unadjusted basis was reported at $310.1 billion, down 14% from the same period a year ago. If residential building is excluded from the year-to-date statistics, new construction starts in the first six months of 2007 were up 2% relative to last year. Table
for Monthly Summary of Construction Value.
The construction start data for June lifted the Dodge
Index (2000=100), to 140, up from May's 129 (2000=100), and marking the highest reading for the Dodge Index over the past twelve months. "Since mid-2006, the overall pattern for total construction has been shaped by the steep downturn for single family housing," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "At the same time, part of the slack has been picked up by continued strength for nonresidential building and public works, and this was especially true in June as several very large projects boosted the nonresidential volume. It's still unclear whether single family housing is close to reaching bottom, and with inventories of unsold homes at high levels and mortgage rates rising, a sustained upturn for single family housing is not expected any time soon. On the plus side, nonresidential building and nonbuilding construction in 2007 are on track to see further growth, on top of gains for these two sectors combined of 10% in 2005 and 19% in 2006."
Nonresidential building in June was $253.2 billion (annual rate), up a substantial 29% from the prior month with the help of a number of very large projects. These included five projects valued each in excess of $500 million -- the massive Fontainebleau hotel/casino in Las Vegas NV, with an estimated construction start cost of $2 billion, a refinery expansion, an automotive plant, and two very large office buildings. By structure type, hotels led June's nonresidential expansion with an increase of 185%. The hotel amount was boosted by $1.2 billion related to the hotel portion of the Fontainebleau project, but June also included groundbreaking for four other large hotel projects, located in Los Angeles CA ($298 million and $102 million), San Antonio TX ($237 million), and Orlando FL ($186 million). The manufacturing plant category soared 170% in June, led by the start of a $1 billion refinery expansion in Louisiana and a $600 million automotive plant (Kia Motors) in Georgia, as well as two large ethanol plants in Iowa valued each at $160 million. Office construction in June grew 7%, featuring the start of a $550 million office tower in New York NY, a $550 million data center in San Antonio TX, and a $103 million office building in Boston MA. Store construction in June rose 6%, helped by the $130 million retail portion of the Fontainebleau project.
On the institutional side, June showed the educational building category rising 9%, aided by groundbreaking for a $295 million college-related project in New York NY. The healthcare facilities category in June held steady with the prior month's elevated amount. The smaller institutional structure types showed a mixed performance in June. Amusement-related projects jumped 75% from a weak May, lifted by $113 million related to the casino portion of the Fontainebleau project. Transportation terminal projects advanced 26%, also from a weak May, while public buildings (courthouses and detention facilities) grew 6% and churches retreated 1%.
During the first half of 2007, nonresidential building was essentially steady with the same period a year ago, which itself had been lifted by an unusual grouping of large projects at the start of 2006. The commercial categories on a year-to-date basis included a 12% gain for stores and shopping centers, which, Murray noted, "continue to reflect the competitive retail landscape, as well as resilience in the face of the sharp drop reported for residential development." Also on the positive side was office construction, up 5%. The top five metropolitan areas, ranked by the dollar amount of new office construction started during the first half of 2007, were - New York NY, Washington DC, Charlotte NC, San Antonio TX, and Miami Fl. Commercial categories with year-to-date declines were warehouses, down 10%; and hotels, down 11% from an exceptional first half of 2006 that included groundbreaking for a considerable number of very large hotel/casinos. Manufacturing plant construction registered a strong increase in dollar volume in the first half of 2007, jumping 27%. The institutional categories revealed a mixed year-to-date performance, with growth reported for educational buildings, up 5%, and the public buildings category, up 20%. On the negative side, year-to-date declines were reported for healthcare facilities, down 1%; churches, down 12%; transportation terminals, down 22%; and amusement-related projects, down 32%.
Residential building, at $283.4 billion (annual rate) in June, grew 4% as multifamily housing shot up 40% from a very weak May. June featured the start of seven multifamily projects valued each in excess of $100 million, led by $375 million related to the condo portion of the large Planet Hollywood hotel/condo in Las Vegas, plus $368 million related to the condo portion of the massive Fontainebleau project. The other five large multifamily projects that reached groundbreaking in June were in varied locations -Vail CO ($160 million), Los Angeles CA ($159 million), Snowmass Village CO ($152 million), Hollywood FL ($150 million), and Chicago IL ($109 million). Murray noted, "On a broad level, multifamily housing has weakened considerably so far in 2007, but there are still instances such as June that are reminiscent of the booming condo market present during 2005 and the first half of 2006." Single family housing in June continued to retreat, slipping 3% in dollar volume, and declines have been reported during four of the first six months of 2007.
For the first half of 2007, residential building was down a sharp 26% from the same period a year ago. Single family housing during this time dropped 26%, reflecting this regional performance - the South Central, down 14%; the Northeast, down 25%; the Midwest, down 26%; the West, down 28%; and the South Atlantic, down 33%. Since the correction for single family housing became especially steep during the second half of 2006, it's expected that the year-to-date decline for single family housing will grow smaller in coming months. Multifamily housing in the January-June period was down a similar 27%, reflecting the comparison to a still brisk pace for this structure type during last year's first six months. Like single family housing, it's expected that the year-to-date weakness for multifamily housing will be less severe as 2007 proceeds.
Nonbuilding construction in June was reported at $125.8 billion (annual rate), a 12% drop that followed a 47% increase for this sector during May. The steepest June declines were reported for bridge projects, down 52% from a May that included the start of the $1.4 billion suspension span of the San Francisco-Oakland Bay Bridge, and the "miscellaneous" category, down 31% from a May that included the start of a $1.9 billion natural gas pipeline in Wyoming, Colorado, and other states. Cushioning the June downturn for the miscellaneous category was $350 million related to groundbreaking for the outdoor baseball stadium of the Minnesota Twins in Minneapolis MN. June also witnessed declines for river/harbor development, down 9%; and electric utilities, down 2%. On the positive side, June featured an 18% increase for sewers, helped by the start of a $300 million waste water treatment facility in the state of Washington. Gains were also reported for highway construction, up 15%; and water supply systems, up 9%.
For the first six months of 2007, nonbuilding construction maintained a 4% lead over last year. Large gains were registered by bridge projects, up 24%; sewers, up 21%; and water supply systems, up 10%. Highway construction came in at the same volume witnessed a year ago, while declines were shown by miscellaneous public works, down 2%; electric utilities, down 4%; and river/harbor development, down 9%.
For total construction, the 14% drop reported for the U.S. in the first half of 2007 was due to this performance by major region - the South Central, down 8%; the Midwest, down 10%; the Northeast, down 13%; the South Atlantic, down 14%; and the West, down 19%.