NEW YORK, June 19, 2015 — (PRNewswire) — At a seasonally adjusted annual rate of $729.7 billion, new construction starts in May climbed 3% compared to April's already elevated pace, according to Dodge Data & Analytics. The nonbuilding construction sector provided much of the lift, given an exceptionally strong amount reported for the electric power and gas plant category, which reflected a massive liquefied natural gas (LNG) export terminal project in Texas being entered as a May start. Residential building showed modest improvement in May, helped by more multifamily housing, while nonresidential building fell sharply from its heightened April volume. During the first five months of 2015, total construction starts on an unadjusted basis were reported at $272.5 billion, up 25% from the same period a year ago. The current year has included the start of twelve massive projects valued each at $1 billion or greater, compared to five such projects during the corresponding period of 2014. If these projects valued at $1 billion or greater are excluded, total construction starts on an unadjusted basis would be up a more moderate 10% year-to-date.
The May statistics raised the Dodge Index to 154 (2000=100), up from a revised 149 for April. Through the first five months of 2015 the Dodge Index averaged 145, boosted by particularly strong readings in February, April, and May. "The presence of unusually large projects, notably several LNG terminals and several petrochemical plants, continues to lift the volume of total construction starts above its underlying trend," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "This lift from unusually large projects is expected to become less pronounced as 2015 proceeds, which still leaves total construction starts growing at about a 10% clip. Nonresidential building is witnessing a broader expansion this year, with its institutional building segment contributing to the upturn along with the strengthening trend already established for commercial building. Residential building is seeing further growth for multifamily housing although any upward movement by single family housing remains hesitant. The public works sector has proven to be surprisingly resilient so far in 2015, as states and localities have picked up some of the slack from essentially flat federal funding. On a cautionary note, public works still faces near term uncertainty, since the recently expired federal transportation legislation was extended by Congress only through the end of July, and the Highway Trust Fund will need to be shored up once again with additional funding."
Nonbuilding construction in May jumped 59% to $262.7 billion (annual rate). The electric power and gas plant category led the way, soaring 229%, which was due in large measure to the massive $9 billion LNG export terminal in Corpus Christi TX being included as a May start. The huge increase for the electric power and gas plant category in May also reflected the start of several very large power plants, including two solar power facilities in California, valued at $1.0 billion and $582 million respectively, as well as a $600 million natural gas-fired power plant in Indiana. While the first five months of 2015 have shown a substantially higher amount of gas plant-related projects, there's also been a greater amount of power plant projects compared to the same period a year ago. The public works categories as a group receded 3% in May. Highway and bridge construction slipped 1%, although May did include the start of two major bridge projects – a $158 million bridge replacement in Indiana and a $146 million bridge upgrade in New Jersey. Through the first five months of 2015, the top five states for highway and bridge construction were Florida, Texas, California, New York, and Illinois. States ranked six through ten for highway and bridge construction during this time were Pennsylvania, North Carolina, Ohio, New Jersey, and Indiana. The miscellaneous public works category, which includes such diverse project types as rail-related work and pipelines, fell 38% in May. The previous month had included $690 million for the start of rail-related work in the Fresno CA area as part of the California high-speed rail project, and by contrast the largest miscellaneous public works construction start in May was a $67 million natural gas pipeline in Pennsylvania. The environmental public works categories all showed strong percentage gains in May. Water supply construction advanced 28%, aided by the start of an $84 million water treatment plant in Alabama, while river/harbor development and sewer construction showed gains of 26% and 23% respectively.
Residential building, at $258.9 billion (annual rate), edged up 2% in May. Multifamily housing improved 7%, regaining upward momentum after settling back during the previous two months. May featured the start of eight multifamily projects valued each in excess of $100 million, with the largest being a $392 million project located in Long Island City NY. Of these eight projects, four were located in the New York NY metropolitan area, with the other four located in San Jose CA, Los Angeles CA, Austin TX, and Chicago IL. Through the first five months of 2015, the top five metropolitan areas in terms of the dollar amount of multifamily starts were the following – New York NY, Miami FL, Washington DC, Boston MA, and Seattle WA. Single family housing in May was unchanged from its April pace, as its pattern of very slight increases followed by flat activity continues. On a regional basis, single family housing in May showed a 3% decline in the West, no change in the South Atlantic, 2% improvement in the South Central and Midwest, and a 7% rebound in the Northeast. Murray noted, "Mortgage rates remain very low, with the 30-year fixed rate currently standing at 4.0%, but first-time homebuyers have yet to give much if any lift to housing demand as the result of such factors as still tight lending standards, high student debt, and the preference by Millennials to stay with rental units in urban areas."
Nonresidential building in May fell 28% to $208.1 billion (annual rate), pulling back after surging 58% in April. The manufacturing building category in April had provided a sizeable boost, rising 513% as the result of an $8.1 billion petrochemical plant in Louisiana being entered as a construction start. While May did include the start of a $208 million HVAC manufacturing plant in Texas, the manufacturing building category plunged 94% in May relative to its exceptional April amount. If the manufacturing building category is excluded, nonresidential building in April would have advanced a more modest 9%, followed by a 12% increase in May. The commercial categories as a group increased 16% in May. Warehouse construction registered a substantial 95% hike, supported by the start of a $207 million warehouse in Texas and a $90 million warehouse in South Carolina. Hotel construction in May climbed 90% after a weak April, and featured groundbreaking for such projects as the $342 million Resorts World & Casino (initial phase) in Las Vegas NV and the $196 million Westin hotel tower in Philadelphia PA. Store construction in May improved 7%, supported by the start of a $210 million shopping mall in Kapolei HI and a $105 million shopping center in the Allentown PA area. Office construction in May retreated 30% following an April that included $1.0 billion for the office portion of a high-rise at the Hudson Yards development in New York NY. May did include the start of several large office interior renovation projects, such as $150 million for work at the 10 Hudson Yards building in New York NY and $60 million for work at the Fan Pier site in Boston MA.