New construction starts in March jumped 23% to a seasonally adjusted annual rate of $482.4 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The increase came as the result of a sharp gain for electric utility construction, lifted in particular by work at a nuclear power plant facility in Georgia. Meanwhile, public works construction and housing showed modest improvement in March, but nonresidential building lost further momentum. For the first three months of 2012, the amount of total construction starts on an unadjusted basis was reported at $94.2 billion, down 3% from a year ago. For the twelve months ending March 2012 versus the twelve months ending March 2011, total construction starts were basically unchanged.
The latest month's data boosted the Dodge Index to 102 (2000=100), up from a revised 83 for February. The annual average for the Dodge Index during both 2010 and 2011 was 91. The March construction start statistics included $8.5 billion estimated for work on Units 3 and 4 at the Vogtle nuclear power facility near Waynesboro GA. In February, the U.S. Nuclear Regulatory Commission approved a combined construction and operating license for Units 3 and 4, enabling construction work to begin on the two nuclear reactors. This follows more than $1.5 billion related to site work for Units 3 and 4 that had been entered into the construction start statistics during 2010 and 2011. If the latest entry for the Vogtle nuclear facility project is excluded, the pace of construction starts in March would be down 3% to $380.4 billion (annual rate), producing a reading of 80 for the Dodge Index. "Aside from the lift coming from electric utilities, the March statistics show that construction activity continues to hover within a set range, with gains for some project types being offset by weakness for other project types," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.. "On balance, the construction industry can still be viewed as struggling to see renewed expansion take hold in a sustained and broad-based manner."
Nonbuilding construction in March soared 79% to $212.9 billion (annual rate). Electric utility construction advanced 249%, led by the $8.5 billion for work at the Vogtle facility in Georgia. If this project is excluded from the March statistics, then nonbuilding construction would be down 7% and electric utilities would be down 33%. While the pace for electric utilities, minus the Vogtle project, was slower, March featured the start of several noteworthy alternative energy projects. These included five large wind power facilities located in Kansas ($783 million), Montana ($300 million), Illinois ($135 million), Oklahoma ($110 million), and Massachusetts ($90 million). The public works sector in March grew 4%, helped by a 27% rebound for highway construction after an especially weak February. The trend for highway construction remains downward, however, as March contracting came in 12% below this category's average monthly pace during 2011. Water supply construction was another public works category that rebounded after a weak February, rising 59% with the help of a $90 million water treatment plant in Texas. The other public works categories retreated in March, with sewer construction down 1%, bridge construction down 11%, river/harbor development down 15%, and miscellaneous public works (site work, mass transit, pipelines, etc.) down 28%.
Residential building, at $146.7 billion (annual rate), grew 2% in March, maintaining the gradual if hesitant upward trend that's been present since the second half of last year. Multifamily housing in March increased 5%, continuing to regain upward momentum after its pause at the start of 2012. Large projects that contributed to the multifamily rise in March included a $184 million apartment building in Brooklyn NY, a $63 million apartment building in Boston MA, and a $38 million apartment building in Seattle WA. Single family housing in March edged up 1%, regaining some strength after slipping back in the previous two months. Compared to their average monthly pace for all of 2011, multifamily housing in March was up 13% while single family housing was up 16%.
Nonresidential building in March fell 4% to $122.8 billion (annual rate). The institutional building sector dropped 7%, due to weaker activity for a majority of its structure types. Healthcare facilities in March fell 30%, after showing some improvement during the first two months of 2012. There were a few noteworthy healthcare projects that reached groundbreaking in March, including a $140 million hospital expansion in Chattanooga TN and a $100 million hospital tower in Memphis TN, but the number of such projects was down from recent months. Murray noted, "Healthcare construction is being restrained in the near term, affected by the increased amount of hospital mergers that have taken place over the past year and the uncertain fate of healthcare reform legislation currently under review by the Supreme Court." The amusement-related category (convention centers, theaters, and sports arenas) dropped 21% in March, and churches also witnessed a 21% decline. Transportation terminal work in March slipped 9%, while the public buildings category (courthouses and detention facilities) was unchanged. On the plus side, the educational building category in March improved 10%, helped by a $105 million renovation to a science building at the U.S. Military Academy in West Point NY, although March still came in 20% below this category's average monthly pace during 2011. Manufacturing plant construction in March plunged 61%, as contracting in early 2012 has retreated following the improved activity reported last year.
The commercial sector in March was able to rise 10% from the previous month. Office construction in March grew 9%, supported by a $120 million office building expansion in San Francisco CA and a $101 million renovation to a federal office building in Cleveland OH. Warehouse construction in March advanced 19%, aided by the start of several large distribution centers for Amazon.com. Hotel construction in March jumped 91% relative to a subdued February, helped by groundbreaking for a $67 million resort hotel and casino in Bossier City LA and a $53 million hotel in Surfside FL. Moving the opposite direction in March was store construction, falling 18%, although March did include two $40 million shopping mall renovation and expansion projects, located in Nanuet NY and Indianapolis IN.
The 3% shortfall for total construction on an unadjusted basis during the first three months of 2012 was the result of a varied pattern by major sector. Nonresidential building was down 25% from the first three months of 2011, which had been boosted by the start of several unusual large projects, including a $1.1 billion data center in Utah for the National Security Agency, a $900 million semiconductor plant in Oregon, and a $575 million hospital in California. Nonbuilding construction during the first three months of 2012 managed a 2% gain, as a 38% increase for electric utilities outweighed a 16% drop for public works. Residential building during the first three months of 2012 climbed 21%, featuring year-to-date growth for both sides of the housing market – single family housing up 22% and multifamily housing up 17%. By geography, total construction during the first three months of 2012 showed declines in three regions – the South Central, down 23%; the West, down 22%; and the Northeast, down 13%. Year-to-date gains for total construction were reported in the Midwest, up 6%; and the South Atlantic, up 54% (reflecting in large part the boost coming from work at the Vogtle nuclear facility in Georgia).
The "no change" for total construction on a twelve-month moving total basis, meaning the twelve months ending March 2012 versus the twelve months ending March 2011, was due to this pattern by major sector – nonresidential building, down 7%; nonbuilding construction, down 3%; and residential building, up 13%. By geography, the twelve months ending March 2012 showed the following behavior for total construction – the South Central, down 10%; the Northeast, down 7%; the Midwest, down 6%; the West, down 2%; and the South Atlantic, up 27%.