February Construction Starts Jump 16 Percent

May 2015

At a seasonally adjusted annual rate of $724.3 billion, new construction starts in February advanced 16 percent compared to the previous month, according to Dodge Data & Analytics. Nonresidential building registered a sharp gain and residential building also strengthened in February, as growth for multifamily housing outweighed a loss of momentum by single-family housing. For the first two months of 2015, total construction starts on an unadjusted basis were up 34 percent from the same period a year ago. If projects in excess of $1 billion are excluded, the result would be more moderate gains for total construction—up 10 percent in February on a seasonally adjusted basis relative to January, and up 8 percent on an unadjusted basis during the first two months of 2015 relative to the same period a year ago.
    
The February statistics produced a reading of 153 for the Dodge Index (2000=100), compared to a revised 132 for January. For 2014 as whole, the Dodge Index averaged 123.
    
“Due to the presence of several unusually large projects, the first two months of 2015 witnessed an especially elevated level of activity that’s exceeded the underlying trend for construction starts,” stated Robert A. Murray, chief economist for Dodge Data & Analytics.

“At the same time, the first two months of 2015 have shown several noteworthy features that point toward the continued expansion for overall construction activity. For commercial building, both office buildings and hotels are continuing to track upward, supported by the increasing amount of private financing directed at real estate development. For institutional building, school construction is now seeing the benefits of large school construction bond measures that were approved in recent years, while healthcare facilities registered an unexpectedly strong performance in February. For residential building, multifamily housing continues to show brisk development activity in major cities. One area of concern for overall construction activity in 2015 relates to single-family housing: Will it be able to move beyond the extended plateau that took hold in 2014?
    
Nonresidential building, at $224.9 billion (annual rate), surged 42 percent in February after a relatively weak performance in January. The manufacturing building category was a major contributor, soaring 663 percent in February. If the manufacturing building category is excluded, nonresidential building in February would still have registered a 19 percent gain. The commercial building group grew 19 percent in February, with a varied performance by project type. Hotel construction bounced back 83 percent after a depressed January. Office construction in February climbed 19 percent, while both stores and warehouses registered a slower pace for construction starts in February, with stores down 9 percent and warehouses down 15 percent.
    
The institutional side of the nonresidential building market rebounded 20 percent in February after a lackluster January. Educational facilities, the largest nonresidential building category by dollar volume, grew 14 percent as it regained the upward momentum that was established in 2014. Healthcare facilities in February jumped 92 percent after a weak January. The smaller institutional categories in February were mixed. Gains were reported for transportation terminals, up 27 percent; and public buildings, up 22 percent; while declines were reported for churches, down 26 percent; and amusement-related projects, down 45 percent.
    
Residential building in February grew 5 percent to $245.7 billion (annual rate), making a partial rebound after an 8 percent decline in January. Multifamily housing registered a strong February, jumping 46 percent.
    
The 34 percent increase for total construction starts on an unadjusted basis during 2015, relative to 2014, was the result of greater activity for all three major construction sectors. Nonbuilding construction year-to-date soared 89 percent. Nonresidential building year-to-date increased 22 percent, with manufacturing buildings and institutional buildings each up 26 percent while commercial buildings climbed 15 percent. Residential building year-to-date improved 7 percent, with single-family housing up 7 percent and multifamily housing up 9 percent.
    
Added perspective is obtained by looking at twelve-month moving totals, in this case the 12 months ending February 2015 versus the 12 months ending February 2014, which lessens the volatility inherent in comparisons of just two months. On this basis, total construction starts advanced 11 percent, as the result of the following performance by major sector: nonresidential building, up 24 percent; residential building, up 9 percent; and nonbuilding construction, up 1 percent.