New construction starts in December fell 3% to a seasonally adjusted annual rate of $410.0 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. Nonresidential building in December held steady with the prior month, and residential building was able to show modest improvement.
However, the non-building construction sector lost momentum in December, as electric utilities retreated from the record pace witnessed earlier in the year. For all of 2011, total construction starts slipped 2% to $421.4 billion, following the slight 1% gain reported for 2010. After the steep declines reported during the 2007-2009 period, when activity dropped a combined 38%, the overall volume of new construction starts has essentially stabilized at a low level during the past two years.
The December statistics produced a reading of 87 for the Dodge Index (2000=100), down from November’s revised 89. For all of 2011, the Dodge Index averaged 89.
“The pace of new construction starts continues to fluctuate within a set range, showing stability in a broad sense but not yet making the transition to renewed expansion,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Gains for a few project types are being offset by continued weakness for other project types, with the result that total construction is experiencing an extended bottom.”
During 2011, stronger activity was reported for multifamily housing, manufacturing plants, electric utilities, and even some commercial property types (hotels and warehouses). These gains were countered by further declines for the publicly financed parts of the construction industry, institutional building and public works, as well as by more weakness for single-family housing.
“For 2012, it’s expected that there will also be a mixed pattern by project type,” Murray added. “The pluses may outweigh the minuses, should the recent pickup in employment growth be accompanied by greater real estate lending by the banking industry, but this year will also see the constraint of diminished federal and state funding support for construction programs.”
Nonresidential building in December, at $142.6 billion (annual rate), was essentially unchanged from November. The institutional categories featured a 9% gain for education-related construction, helped by the December start of a $140-million medical research facility in Houston and an $83-million high school in Washington, D.C. The depressed public buildings category showed a brief upturn in December, climbing 118% due to groundbreaking for a $512-million detention facility complex in Stockton, Calif.
Transportation terminal work in December jumped 98%, reflecting the start of a $125-million airport terminal renovation project at Dallas-Fort Worth International Airport. Moving in the opposite direction for December were health-care facilities, down 55%; and recreation-related projects, down 12%. Church construction in December was unchanged from the previous month.
The commercial categories in December were led by a large gain for hotels, up 65%, with the lift coming from the start of a $70-million hotel in Chicago and a $45-million hotel renovation in Boston. Greater activity was also reported for warehouses, up 42%; and stores, up 4%; but office construction retreated 26%.
The manufacturing plant category in December did include the start of several large projects, such as a $388-million oil refinery in Washington state, but for the month, this category was still down 3%.
For 2011 as a whole, nonresidential building dropped 4% to $154.8 billion, the same as the 4% retreat for 2010 but less severe than the 30% plunge back in 2009. Most of the downward pull in 2011 came from the institutional sector, which fell 14%. The two largest institutional categories, educational buildings and health-care facilities, registered moderate declines of 12% and 9%, respectively.
More substantial declines were posted by the smaller institutional categories—public buildings, down 14%; churches, down 15%; recreation- related projects, down 18%; and transportation terminals, down 29%.
The commercial sector in 2011 registered a 6% gain in dollar terms, a noteworthy change following the declines of 12% in 2010 and 42% in 2009. The upward push for the commercial sector in 2011 came from hotels, up 51%; and warehouses, up 18%; with both showing improvement from extremely depressed activity in 2010. While stores and offices continued to lose momentum in 2011, with respective shortfalls of 1% and 6%, the declines were considerably more gradual than what occurred during the previous three years.
Manufacturing plant construction in 2011 surged 61%, reflecting both a broad-based upturn for this category as well as the boost coming from several massive projects, which included a $3.0 billion coal-to-gasoline plant and two large semiconductor plants.