New construction starts in December climbed 23% to a seasonally adjusted annual rate of $530.0 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The sharp increase for total construction followed two months of lackluster activity, as several very large projects in December helped to lift the pace of contracting. By major sector, substantial gains in December were reported for nonresidential building and nonbuilding construction, while housing maintained the steady upward trend that’s been present for much of the past year. For all of 2012, total construction starts grew 6% to $463.6 billion, a moderate yet stronger rate of increase than what took place during 2010 (up 2%) and 2011 (up 1%).
The December statistics produced a reading of 112 for the Dodge Index (2000=100), up from a revised 91 for November. For 2012 as a whole, the Dodge Index averaged 98. “The year ended on a strong note, with December coming in at the upper end of the range of activity reported during 2012,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “The subdued activity witnessed during October and November suggested that the hesitant recovery for construction starts might be losing momentum, but December’s strength alleviates some of that concern. The 6% gain for total construction starts in 2012 indicates that the tenuous expansion for construction is beginning to gain traction, particularly after the basically flat activity experienced during the previous two years. In 2012, single family housing registered steady improvement, finally joining the recovery process already underway for multifamily housing. Commercial building, while still at a very weak level, edged upward, and electric utility starts achieved a new high in current dollar terms. However, both the institutional building and public works sectors continued to slide back, adversely affected by tight federal and state budgets.”
Nonresidential building in December surged 33% to $189.0 billion (annual rate), with growth registered by most of its structure types. The commercial sector featured a strong 53% gain for office construction, led by $714 million for the office portion of an $850 million 47-story high-rise building that is the initial project of the massive Hudson Yards development in New York NY. Other large office projects that reached groundbreaking in December included an $81 million government office building in New Cumberland PA and an $80 million headquarters for Southwest Airlines in Dallas TX. Store construction in December grew 37%, led by $129 million for the retail portion of the $850 million Hudson Yards high-rise, as well as an $85 million shopping center renovation in Saint Ann MO. Warehouse construction in December rebounded 84% from a very weak November, helped by a $96 million distribution center for a major grocery store chain in Orlando FL. In contrast to the increases shown by these commercial structure types, hotel construction in December was flat. Manufacturing plant construction, which can be volatile on a month-to-month basis, surged 177% in December after a very weak November. Two large projects boosted December’s manufacturing performance – a $1.4 billion fertilizer plant in Iowa and a $500 million natural gas processing facility in Ohio.
On the institutional side, healthcare facilities in December grew 12%, aided by a $615 million hospital expansion in Palo Alto CA and a $200 million ambulatory pavilion for a major hospital in Oak Lawn IL. Educational buildings, the largest institutional category, grew 4% in December, supported by a $325 million research facility in New York NY and a $95 million state library and museum in Juneau AK. The smaller institutional categories all showed strong percentage growth in December. The public buildings category increased 56%, lifted by a $316 million correctional facility in Schwenksville PA, while a 22% gain for the amusement category reflected the start of a $100 million hockey arena in Allentown PA. After very depressed activity in November, transportation terminals and churches posted large December gains, rising 77% and 45% respectively.
For 2012 as a whole, nonresidential building dropped 9% to $149.7 billion. The institutional categories fell a combined 12%, a bit steeper than the 11% slide reported for 2011. The two largest institutional categories continued their retreat in 2012, with educational buildings down 14% and healthcare facilities down 6%. Other institutional declines for the full year 2012 were the following – public buildings and transportation terminals, each down 13%; churches, down 18%; and amusement-related projects, down 21%. The manufacturing plant category for the full year 2012 plunged 33%, retreating after the 80% gain reported in 2011 that reflected groundbreaking for a $3.0 billion coal-to-gasoline plant and two large semiconductor plants. The commercial sector in 2012 grew 5%, not as large as the 15% gain reported for 2011, but still expansion. Moderate growth in 2012 was registered by stores, up 10%; hotels, up 14%; and warehouses, up 15%. However, office construction in 2012 slipped back 7%, given the comparison to 2011 which included the start of a $1.1 billion government data center in Utah. While the dollar amount for nonresidential building was down 9% for the full year 2012, square footage for nonresidential building was up 4% during this time.
Residential building in December increased 6% to $198.5 billion (annual rate). Single family housing advanced another 3% in December, and over the course of 2012 demonstrated remarkably steady growth, with gains reported in eleven out of the twelve months. Multifamily housing showed a more varied pattern during 2012, but ended the year with a 15% gain in December. Large multifamily projects that supported the December gain included two large apartment buildings in New York NY, valued at $500 million and $384 million respectively; a $213 million apartment building in Fort Lee NJ; a $125 million student housing project adjacent to Temple University in Philadelphia PA; and a $118 million renovation to an apartment complex in Venice CA.
The 2012 amount for residential building was $163.4 billion, up 29%, which marked a noteworthy change from the modest 4% gain registered in 2011. Single family housing in 2012 climbed 29% in dollar terms, versus the 3% decline that was reported for 2011. The regional pattern for single family housing in 2012 showed increases for all five major regions, as follows – the West, up 40%; the Midwest, up 32%; the South Atlantic, up 29%; the South Central, up 23%; and the Northeast, up 15%. Multifamily housing in 2012 advanced 30%, showing additional growth on top of increases in 2010 (up 21%) and 2011 (up 34%). By major region, multifamily housing registered this performance in 2012 – the West, up 46%; the Northeast, up 35%; the South Central and the South Atlantic, each up 27%; and the Midwest, up 10%. The top five metropolitan areas in terms of the 2012 dollar amount of multifamily starts were – New York NY, up 45%; Washington DC, up 9%; Miami FL, up 128%; Los Angeles CA, up 48%; and Boston MA, up 22%. The large increase for multifamily housing in the West was helped by the 48% gain for Los Angeles, as well as growth in such metropolitan areas as Seattle WA, up 36%; San Francisco CA, up 24%; Denver CO, up 87%; and Phoenix AZ, up 116%.
Nonbuilding construction in December soared 42% to $142.5 billion (annual rate), rebounding sharply after its depressed November amount. Much of the December boost came from a 635% jump for the electric utility category, bouncing back to the elevated contracting witnessed earlier in the year before the sharp retreat in October and November. Large electric utility projects that were reported as December starts included a $950 million transmission line project in New Jersey and Pennsylvania and a $945 million solar power plant in California. The public works sector in December improved 7%, making a partial rebound after sliding 22% in the previous month. The environmental categories strengthened after their depressed performance in November, with sewers up 32%, river/harbor development, up 17%; and water supply systems, up 6%. Highway construction in December increased 8%, helped by a $360 million segment of the I-95/395 HOV-HOT Lanes project in Virginia and a $101 million shoulder restoration project for the Garden State Parkway in New Jersey. On the negative side, bridge construction in December was down 6%, and miscellaneous public works (which includes site work, pipelines, rail lines, etc.) slipped 1%.
For the full year 2012, nonbuilding construction grew 2% to $150.5 billion. Electric utility construction advanced 9%, showing further growth on top of the 53% increase reported for 2011, as this category achieved a new current dollar high at $47.9 billion. The start of work at two nuclear facilities, Units 3 and 4 at the Vogtle Plant in Waynesboro GA and Units 2 and 3 at the V.C. Summer Plant in Jenkinsville SC, contributed $17.0 billion to the 2012 electric utility total. In addition, transmission line work in 2012 held close to its heightened 2011 amount, but the recent brisk pace for solar and wind power projects began to subside. Public works construction in 2012 settled back 1%, a much less severe drop than the 14% decline reported in 2011. A large 35% gain for miscellaneous public works cushioned the extent of the 2012 public works shortfall; if the miscellaneous public works category is excluded, then the public works sector in 2012 would be down 8%. Miscellaneous public works in 2012 benefitted from gains for pipeline and rail-related projects. Highway and bridge construction continued to recede in 2012, with highways down 9% and bridges down 3%. The environmental categories in 2012 were mixed, with river/harbor development and sewers showing respective declines of 20% and 13%, while water supply construction managed to rise 7% from its weak 2011 amount.
The 6% gain for total construction starts at the national level in 2012 was the result of varied behavior at the five region level. Leading the way was the South Atlantic, up 19%; with much of the upward push coming from the start of the two massive nuclear power projects in Georgia and South Carolina. If these two projects are excluded, then total construction starts in the South Atlantic would be unchanged from the prior year. Gains for full year 2012 total construction were also reported for the Midwest, up 9%; the South Central, up 7%; and the Northeast, up 2%. The West was the one major region in 2012 to register a decline for total construction starts, falling 7%.