October Construction Totals Unchanged from September

At a seasonally adjusted annual rate of $570.4 billion, new construction starts in October stayed essentially the same as September, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. While total construction was unchanged, there was a varied performance by construction’s main sectors. Nonresidential building showed renewed growth after retreating in September, but a loss of momentum was reported for residential building and public works. During the first 10 months of 2007, total construction on an unadjusted basis came in at $530 billion, down 10% from the same period in 2006.

Excluding residential building, new construction starts in the first 10 months of 2007 advanced 4% compared to last year.

The October data kept the Dodge Index at 121 (2000=100), the same reading as in September.

Nonresidential Building

Nonresidential building in October jumped 9% to $221.8 billion, helped by strong gains for several institutional structure types. Health-care facilities surged 47%, boosted by the groundbreaking for three large hospital projects in Kentucky ($400 million), Wisconsin ($161 million) and Arizona ($160 million).

The public buildings category (courthouses and detention facilities) climbed 41%, regaining the heightened activity reported earlier, with October including such projects as a $71-million federal courthouse in Buffalo, N.Y. Transportation terminal work rebounded 88% from a weak September, helped by a $190-million addition for a baggage screening facility at Los Angeles International Airport. While the educational building category settled back 4% in October, this structure type showed several large projects reach groundbreaking—a $300-million addition to a research center in New York City, plus three new university buildings in Princeton N.J. ($150 million), Cambridge, Mass. ($140 million) and Ithaca, N.Y. ($108 million).

Amusement-related work in October slipped 1% while church construction declined 6%.

On the commercial side, hotel construction had a strong October, rising 13%. The largest hotel project included as an October start was $550 million for the hotel portion of the massive Cosmopolitan Resort and Casino in Las Vegas, with an estimated construction cost of $1.4 billion. Warehouse construction also posted a substantial gain, rebounding 30% after a sluggish September. The office category improved 7% in October, aided by groundbreaking for large projects in Washington, D.C. ($160 million), Northlake, Ill. ($90 million), Seattle ($84 million) and two in Denver ($78 million and $76 million).

Store construction in October retreated 8% from the elevated pace reported in September although October did include two large retail projects in Las Vegas—the $171-million retail portion of the Cosmopolitan Resort and Casino and $120 million for a retail addition to the huge Project City Center.

Manufacturing plant construction had a subdued October, falling 25% from the previous month.

Residential Building

Residential building, at $239.1 billion, dropped 4% in October. Single-family housing slipped 2% in dollar terms and has shown declines in nine out of the first 10 months of 2007. For the January to October period, single-family construction came in 25% below a year ago, the result of this pattern by region—the South Atlantic, down 32%; the West, down 27%; the Midwest, down 24%; the Northeast, down 18%; and the South Central, down 17%.

Multifamily housing in October dropped 8%, as its declining trend resumed after a brief upturn in September. The multifamily category in October included a few noteworthy projects, such as $585 million for the condo portion of the Cosmopolitan Resort and Casino in Las Vegas and $129 million for the condo portion of a $140-million high-rise in Chicago, but in general the number of major condominium projects that have reached groundbreaking in 2007 is down considerably from last year.

For the January through October period, multifamily housing has fallen 16% in dollar terms from 2006, reflecting this behavior by region—the Northeast, down 29%; the South Atlantic, down 28%; the South Central, down 10%; the Midwest, down 6%; and the West, down 2%.

Nonbuilding Construction

Nonbuilding construction in October retreated 7% to $109.5 billion, as declines were reported for most of the public works categories. Highway and bridge construction fell 16% in October, slipping from the strong contracting witnessed earlier in the year.

For the environmental categories, reduced activity in October was reported for river/harbor development, down 4%; and water supply systems, down 34%. Sewer construction was down a relatively small 2%, as its decline was cushioned by a $211-million expansion for a wastewater treatment plant in California.

The miscellaneous public works category, which includes a diverse set of project types, did rise 13% in October, aided by the start of two large projects—$407 million related to excavation for a rail tunnel in New York City and $190 million related to improvements at Kauffman Stadium in Kansas City, Mo.

Also providing some support to the nonbuilding total was a 136% increase for electric utility construction from a weak September. The largest electric utility project entered as a start for October was a $178-million wind farm in Wisconsin.

The 10% reduction for total construction during the first 10 months of 2007 relative to last year was due to this performance by major sector—residential building, down 24%; nonbuilding construction, up 3%; and nonresidential building, up 4%.

Click here for more DDJ Features >>