New Construction Starts in December Decline 10 Percent

March 2019

New construction starts in December fell 10 percent to a seasonally adjusted annual rate of $708.9 billion, continuing to retreat after November’s 7 percent slide, according to Dodge Data & Analytics. The December downturn reflected diminished activity for each of the three main construction sectors. Nonresidential building dropped 14 percent, as its commercial building segment lost momentum following its heightened November amount. Residential building pulled back 8 percent, due to reduced activity in December for both single-family and multifamily housing. Nonbuilding construction decreased 9 percent.
    
For 2018 as a whole, total construction starts increased a slight 0.3 percent to $789.0 billion. This came after 7 percent gains in both 2016 and 2017, as well as 11 percent to 14 percent gains from 2012 through 2015. The 2018 increase for total construction starts was restrained by a 31 percent plunge for the electric utility/gas plant category. If electric utilities and gas plants are excluded, total construction starts for 2018 would be up 2 percent from 2017.
    
The December statistics produced a reading of 150 for the Dodge Index (2000=100), down from 167 in November and 179 in October, while matching the 2018 low at 150 reported back in September. For the full year 2018, the Dodge Index averaged 167.
    
“The monthly pattern of construction starts was mixed during 2018, as elevated activity in June and October was offset by weaker activity in the months immediately following, with the end result being that the 2018 dollar amount of construction starts was slightly above the previous year,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “By recent standards, the overall level of construction starts in 2018 can be regarded as healthy, but the substantially slower rate of growth compared to the prior six years is suggestive of a market that’s close to a peak.”
    
Nonresidential building in December was $242.8 billion (annual rate), down 14 percent from the previous month. The commercial building categories as a group fell 27 percent after registering a 15 percent increase in November.
    
For 2018 as a whole, nonresidential building eased back 1 percent to $282.8 billion after its 11 percent increase in 2017. A major reason for the double-digit gain in 2017 was an 18 percent jump by the institutional building segment, which benefitted from a sharp 126 percent hike for transportation terminal starts. In 2018, transportation terminal construction starts pulled back 42 percent, which contributed to a 7 percent decline for the institutional building categories as a group. Even with its 2018 decline, transportation terminal construction was still healthy by recent standards (up 31 percent from its 2016 amount). Reduced activity in 2018 was also shown by healthcare facilities, which retreated 9 percent after its 6 percent gain in 2017. In 2018, large hospital projects continued to reach groundbreaking, although not quite to the same extent as 2017. Full year 2018 declines were also posted by church construction, down 21 percent; and the public buildings category, down 2 percent. On the plus side for institutional building in 2018, educational facilities continued to see moderate growth, rising 5 percent and helped in particular by a 16 percent advance for K-12 school buildings. The top five states ranked by the dollar amount of K-12 school construction starts in 2018, with their percent change from the previous year, were the following: Texas, up 9 percent; California, up 30 percent; New York, up 12 percent; Washington, up 35 percent; and Pennsylvania, up 105 percent. Amusement-related construction starts also strengthened in 2018, rising 9 percent.
    
The commercial building categories as a group grew 1 percent in 2018, the same as the 1 percent rise in 2017, which followed a 23 percent surge in 2016. Office construction in 2018 advanced 10 percent. The top five metropolitan areas ranked by the dollar amount of new office construction starts, with their percent change from the previous year, were New York, N.Y., up 22 percent; Washington, D.C., up 36 percent; Boston, up 102 percent; Chicago, up 67 percent; and Atlanta, up 2 percent. Hotel construction starts in 2018 climbed 11 percent, and commercial garage construction starts in 2018 held steady with 2017, while warehouse construction starts settled back 6 percent from a very strong 2017. Store construction in 2018 fell 21 percent, dropping for the second year in a row after a 5 percent decline in 2017. The manufacturing plant category in 2018 strengthened 20 percent.
    
Residential building in December was $300.6 billion (annual rate), down 8 percent from the previous month. Multifamily housing retreated 15 percent, slipping for the second month in a row after a 19 percent gain in October. Single-family housing in December dropped 5 percent, settling back from the extended plateau that was present for much of 2018. The December pace for single-family housing was down 7 percent from the average dollar volume for the previous 11 months.
    
The 2018 amount for residential building was $323.5 billion, up 5 percent. Multifamily housing grew 8 percent in 2018, rebounding from the 8 percent decline that was reported for 2017. The top five metropolitan areas ranked by the 2018 dollar amount of multifamily starts, with their percent change from a year ago, were  New York, N.Y., up 2 percent; Boston, up 71 percent; Washington, D.C., up 26 percent; Miami, up 43 percent; and Los Angeles, down 11 percent. Metropolitan areas ranked 6 through 10 were San Francisco, up 23 percent; Seattle, up 25 percent; Dallas–Ft. Worth, up 24 percent; Chicago, down 28 percent; and Philadelphia, up 3 percent. Eight of the top 10 metropolitan areas for multifamily housing were able to report gains in 2018 relative to the prior year, comparing favorably to 2017 ,which saw only three of the top 10 metropolitan areas reporting gains relative to the prior year. Single-family housing in 2018 grew 4 percent, a smaller increase than the 9 percent pickup in 2017. By geography, single-family housing in 2018 showed this pattern for the five major regions: the West, up 8 percent; the South Atlantic, up 5 percent; the South Central, up 4 percent; the Midwest, up 1 percent; and the Northeast, down 1 percent.
    
The slight 0.3 percent increase for total construction starts at the national level in 2018 was the result of gains in four of the five major regions: the South Central, up 10 percent; the Midwest, up 4 percent; and the South Atlantic and the West, each up 1 percent. The Northeast experienced a 15 percent decline for total construction starts in 2018, following its 20 percent jump in 2017.