Construction Starts Fall 21 Percent in December

March 2020

Total construction starts in the final month of 2019 dropped 21 percent from the previous month to a seasonally adjusted annual rate of $800.4 billion, according to Dodge Data & Analytics. The sharp decline was largely a response to hefty gains posted in November’s utility and manufacturing sectors. When removing the influence of these two very volatile sectors, total construction starts fell only 3 percent in December. By major sector, nonresidential building starts fell 20 percent in December, while nonbuilding starts dropped 41 percent, and residential starts lost 4 percent over the month.
    
The pullback in December pushed the Dodge Index down to 169 (2000=100) compared to the 213 posted in November, and just below the 12-month average of 174.
    
For the full year, total construction starts were essentially flat when compared to 2018 at $817.6 billion. In 2019, nonbuilding starts gained 7 percent due to large gains in utility starts, while nonresidential starts fell 1 percent and residential starts declined 3 percent. Removing the massive 112 percent gain in utility starts from the total would result in total construction declining 3 percent from the previous year.
    
“Last year (2019) will go down as one of the most volatile years for monthly construction starts due to the lumpy nature of large projects,” stated Richard Branch, chief economist of Dodge Data & Analytics. “Looking beyond the influence of these massive projects, it is evident that the uncertainty surrounding trade policy weighed on construction activity last year.”
    
Nonresidential building dropped 20 percent from November to December to a seasonally adjusted annual rate of $289.5 billion. The main reason for the decline in December was a 93 percent decline in manufacturing after a large petrochemical plant broke ground in November. Institutional starts rose 6 percent over the month fueled by gains in healthcare and recreation. Commercial starts rose 5 percent in December due to solid gains in warehouses and parking structures.
    
The largest nonresidential building project to break ground in December was the $712 million National Geospatial Agency Headquarters in Saint Louis, Mo. Also breaking ground in December was a $570 million medical center renovation in Bethesda, Md., and a $400 million consolidated rental car facility at Newark International Airport.
    
For the full year, nonresidential building starts fell 1 percent. Commercial building starts rose 6 percent last year due to gains in warehouses and offices, while institutional starts fell 5 percent with activity in all major categories seeing a pullback. Manufacturing starts fell 15 percent in 2019.
    
Residential building starts fell 4 percent in December to a seasonally adjusted annual rate of $339.5 billion. During the month single-family starts lost 7 percent, while multifamily posted a tepid 1 percent gain from November.
    
The largest multifamily structure to break ground during the month was the $470 million 1000 Michigan South Loop Condo Tower in Chicago. Also starting in December was the $215 million Koula Mixed-Use Tower in Honolulu and the $170 million Alta Xmbly Block 23 facility in Somerville, Mass.
    
For the full year, residential starts were 3 percent lower than in 2018. Single-family starts ended 2019 down 1 percent, while multifamily starts lost 7 percent for the year.