October Construction Starts Fall 9 Percent

January 2018

New construction starts in October dropped 9 percent to a seasonally adjusted annual rate of $742.9 billion, pulling back after a 14 percent jump in September, according to Dodge Data & Analytics. The pattern for total construction starts was shaped by nonresidential building, which fell 30 percent in October after soaring 37 percent in September. Although nonresidential building in October did include the start of several very large projects, led by the $1.1 billion new ballpark for the Texas Rangers in Arlington, Texas, they were not the same magnitude as the three exceptionally large projects entered as September starts.
    
Residential building in October slipped 1 percent, due to a slower pace for multifamily housing. Running counter was a sharp 27 percent increase for nonbuilding construction, which was lifted by the start of the $3.0 billion expansion of the Atlantic Sunrise natural gas pipeline in Pennsylvania and Virginia.
    
For the first 10 months of 2017, total construction starts on an unadjusted basis were $631.2 billion, up 1 percent from the same period a year ago. The year-to-date gain for total construction was restrained by a 38 percent drop for the electric utility/gas plant category. If the electric utility/gas plant category is excluded, total construction starts during the first 10 months of 2017 would be up 4 percent relative to the same period a year ago.
    
October’s data lowered the Dodge Index to 157 (2000=100), compared to a revised 173 for September which was the highest reading so far in 2017.
    
Nonresidential building in October was $258.7 billion (annual rate), down 30 percent after the 37 percent hike reported in September. The manufacturing building category dropped 67 percent following its sixfold jump in September that featured the start of the $6.0 billion ethane cracker plant in Pennsylvania. October did include several large manufacturing plants, such as a $675 million polyethylene production plant and a $450 million oil refinery, both located in Texas, but they were not close to matching the size of September’s ethane cracker plant.
    
The institutional categories as a group in October fell 36 percent following a 25 percent increase in September. Transportation terminal work was down 82 percent, and declines were also reported for educational and healthcare facilities. The educational facilities category dropped 29 percent, and healthcare facilities fell 21 percent. On the plus side, the amusement and recreational category soared 121 percent, and gains were also reported for religious buildings, up 20 percent, and public buildings, up 15 percent.
    
The commercial categories as a group were able to advance 10 percent in October. The decline for the office building category was limited by the October groundbreaking for several noteworthy projects. Store construction improved 34 percent from a subdued September, while new warehouse construction grew 27 percent, and hotel construction strengthened 32 percent.
    
Residential building in October receded 1 percent to $295.9 billion (annual rate), continuing to hover within the narrow range that’s been reported for the past six months. Multifamily housing dropped 3 percent, as there were four large multifamily projects valued each at $100 million or more that reached groundbreaking compared to seven such projects in September.
    
In October, the top five metropolitan markets ranked by the dollar amount of multifamily starts were New York City, Miami, Washington, D.C., Seattle and Los Angeles. During the first 10 months of 2017, the top five markets ranked by the dollar amount of multifamily starts, with their percent change from a year ago, were New York City, down 1 percent; Los Angeles, down 13 percent; Chicago, down 23 percent; Washington, D.C., down 13 percent; and Atlanta, up 26 percent. Metropolitan areas ranked 6 through 10 during the first 10 months of 2017 were San Francisco, down 2 percent; Miami, down 50 percent; Boston, down 20 percent; Seattle, down 20 percent; and Dallas–Fort Worth, down 37 percent. Single-family housing held steady in October, continuing to stabilize after losing momentum in early summer. During the first 10 months of 2017, the pattern by five major regions for the dollar amount of single-family housing was the following: the South Atlantic, up 11 percent; the South Central, up 8 percent; the West, up 7 percent; the Midwest, up 5 percent; and the Northeast, down 1 percent.
    
The 1 percent increase for total construction starts on an unadjusted basis during the first 10 months of 2017 was due to mixed behavior by the three major construction sectors. Nonresidential building increased 8 percent year-to-date, with institutional building up 18 percent while commercial building slipped 7 percent. The manufacturing building category was up 31 percent so far in 2017, aided by this year’s rebound for petrochemical plant starts. Residential building grew 1 percent year-to-date, with an 8 percent gain for single-family housing slightly outweighing a 13 percent drop for multifamily housing. Nonbuilding construction year-to-date fell 7 percent, the result of a 5 percent rise for public works and a 38 percent drop for electric utilities/gas plants.
    
By region, total construction starts during the January–October period of 2017 revealed this pattern compared to a year ago: the Northeast, up 23 percent; the South Atlantic, up 3 percent; the West, up 2 percent; the South Central, down 5 percent; and the Midwest, down 12 percent. The 5 percent decline in the South Central reflected in part the comparison to last year that included $6.2 billion for two liquefied natural gas terminals, while the 12 percent decline in the Midwest reflected in part the comparison to last year that included the $3.8 billion Dakota Access pipeline and Chicago’s $900 million Wanda Vista tower.