June Construction Slips 1% Nationwide

New construction starts in June retreated 1% to a seasonally adjusted annual rate of $552 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos.

Nonresidential building fell 12% after its elevated May pace, pulling down the volume of total construction. Meanwhile, residential building registered a modest 2% gain in June, and a more substantial 19% increase was reported for nonbuilding construction.

During the first six months of 2008, total construction on an unadjusted basis came in at $282.1 billion, down 16% from a year ago. If residential building is excluded, new construction starts in the first six months of 2008 were up 3%. The June statistics produced a 117 reading for the Dodge Index (2000=100), compared to May’s 118.

Nonresidential Building

Nonresidential building in June was $233.2 billion, a 12% decline that followed a 32% jump in May. Much of May’s strength came from the start of a massive $3.8-billion oil refinery expansion in Indiana. June also included the start of a major refinery project, a $1.9-billion refinery addition in Michigan, which though considerable in scope, was smaller than the entry for May. Reflecting the impact of these two refinery projects, the manufacturing plant category in June fell 43%.

The June retreat for manufacturing plants was made somewhat less severe by the start of a $250-million steel mill in Alabama. The commercial categories showed a mixed performance in June. Store construction revealed a further loss of momentum, slipping 3%, and a similar 2% decline was reported for warehouses. On the plus side, hotel construction jumped 35% in June, boosted by the groundbreaking for a $270-million hotel in Uncasville, Conn., and a $226-million convention center hotel in Indianapolis.

Office construction also witnessed expansion in June, rising 4% with the help of a $140-million office project in Washington, D.C.

The institutional categories in June showed a 33% pullback for healthcare facilities, following heightened activity in the previous two months. Amusement-related construction in June dropped 31%. The educational building category showed more growth in June, climbing 8% with the push coming from the start of several large high school projects, including a $186-million high school in Newton, Mass.

During the first half of 2008, nonresidential building registered a 6% gain compared to last year. The manufacturing plant category surged 132%, lifted by the large refinery projects in May and June, plus a $7-billion refinery expansion in Texas reported as a January start. Hotel construction advanced 37% during the first half of 2008, aided by the start of three very large hotel/casino projects at the outset of 2008, located in Las Vegas and Atlantic City.

Office construction during the first half of 2008 was steady in dollar volume and included groundbreaking for World Trade Center Towers 2, 3, and 4 in New York City, each valued in excess of $1 billion.

Showing the impact of the difficult economic climate were stores and warehouses, with year-to-date declines of 25% and 32%, respectively. The institutional categories in the first half of 2008 included dollar volume gains for educational buildings, up 2%; amusement-related construction, up 3%; healthcare facilities, up 4%; public buildings, up 23%; and dormitories, up 30%. Reduced activity for the January-June period was reported for transportation terminals, down 7%; and churches, down 16%.

Residential Building

Residential building, at $179 billion, rose 2% in June as the result of moderate improvement for multifamily housing. Helped by start of three large projects in New York City, plus the start of a $139-million residential complex in Salt Lake City, multifamily housing in June climbed 11%.

However, single-family housing slipped an additional 1%, as the lengthy correction for home building remains very much in progress.

For the first half of 2008, residential building was down 39% from the same period a year ago. Single-family housing during this time fell 38%, reflecting the following regional performance—the West, down 48%; the South Atlantic, down 40%; the Midwest, down 38%; the South Central, down 30%; and the Northeast, down 22%. Particularly large dollar volume declines for single-family housing were reported by these states—Nevada, down 59%; Utah, down 59%; California, down 52%; Georgia, down 51%; and Arizona, down 49%.

The construction start statistics indicate that during the first half of 2008 there were 12 multifamily projects valued at $100 million or more, compared to 21 such projects during the first half of 2007.

Nonbuilding Construction

Nonbuilding construction in June was $139.9 billion, a 19% rise that reflected greater activity for power plants, pipelines and sewers. After May’s weak amount, the electric power category soared 336% in June, boosted by the start of a $500-million wind farm in Montana, plus two large power plants in Pennsylvania—a $475-million gas-fired plant and a $425-million coal-fired plant. The “miscellaneous” public works category, which includes pipeline work, jumped 50% in June with much of the lift coming from an $820-million expansion to a natural gas pipeline located in Arkansas and Mississippi.

The sewer category advanced 40% in June, aided by the $448-million upgrade to a water pollution control plant in New York City. The other environmental project types witnessed reduced contracting in June, with water supply systems down 32% and river/harbor development down 31%. Declines were also reported in June for highways, down 16%; and bridges, down 5%.

For the first six months of 2008, nonbuilding construction came in 3% below the same period a year ago. Highway construction retreated 7% while the bridge category was down 18% from the first half of 2007, which included $1.4 billion for the start of work on the suspension span of the San Francisco-Oakland Bay Bridge.

The year-to-date statistics also showed decreased activity for sewers, down 9%; and miscellaneous public works, down 13%. On the plus side for public works, growth was reported for river/harbor development, up 1%; and water supply systems, up 15%. The electric power category grew 26% in the first six months of 2008, and renewed expansion for full year 2008 now appears likely after the moderate retreat experienced in 2007.

For total construction, the 16% drop reported for the U.S. in the first half of 2008 reflected double-digit declines in three regions—the South Atlantic, down 28%; the West, down 26%; and the Midwest, down 11%. The South Central was down a more moderate 4% year-to-date while the Northeast stood apart from the other regions by advancing 5%.