January Construction Recedes 2 Percent

Press Release

January Construction Recedes 2 Percent

February 21, 2012 - New York, NY

The value of new construction starts dropped 2% in January to a seasonally adjusted annual rate of $402.2 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Both nonresidential building and housing settled back from December, while the nonbuilding construction sector managed to register a modest gain with the help of a rebound for new electric utility starts.  On an unadjusted basis, total construction starts in January were reported at $27.0 billion, down 14% from the same month a year ago.  For the twelve months ending January 2012 versus the twelve months ending January 2011, which lessens the volatility present in one-month comparisons, total construction starts were down 3%.

The January statistics lowered the Dodge Index to 85 (2000=100), compared to December's reading of 87.  Over the course of 2011, the Dodge Index moved within the range of 81 to 101, with the average for last year coming in at 90.  "For construction starts, the year 2012 got off slowly, with activity retreating further into the lower half of its recent range," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  "This is consistent with the view that construction is still struggling to achieve upward momentum, even with the recent improvement shown by the U.S. economy.  There were some positive signs for construction during 2011, such as a stronger volume for multifamily housing, a record high for new electric utility starts, and even gains for a few commercial structure types (hotels and warehouses).  However, these positives were offset by declines for single family housing, public works, and institutional building.  For 2012, both public works and institutional building will continue to be affected by diminished federal funding, as well as by tight state and local budgets.  Single family housing may draw some benefit from the recent federal-state agreement with major banks to rework troubled mortgages, but homebuyer demand will still be restrained by more stringent bank lending standards, which limits any construction upturn.  While multifamily housing appears on the upswing and commercial building seems to be turning the corner, both will require more available bank financing.  There were some signs that this was taking place during the first half of 2011, before concerns about the debt crisis in Europe during the second half of 2011 caused banks to adopt a more wait-and see approach."

Nonresidential building in January slipped 1% to $139.9 billion (annual rate).  On the institutional side, weaker activity was reported for most of the structure types.  The educational building category, which fell 12% during 2011, dropped 3% in January relative to the previous month.  There were several noteworthy education-related projects that reached groundbreaking in January, including three research and laboratory facilities in these locations – Baltimore MD ($144 million), Boston MA ($93 million), and Berkeley CA ($86 million), but they were not enough to offset the downward trend for this category.  In similar fashion, the public buildings category in January included the start of a large courthouse in San Bernardino CA ($272 million) and a large detention facility in Detroit MI ($220 million), but for the month contracting was still down 23%.  Amusement-related projects and churches in January were each down 6%, while transportation terminal work dropped 36%.  The one institutional structure type that registered a January gain was healthcare facilities, which soared 105% due to the start of a $583 million replacement hospital in Denver CO.

On the commercial side, the recent upward trend for hotels and warehouses paused in January, with hotels down 16% and warehouses down 11%. The decline for hotels came despite the start of a $180 million resort hotel in Lake Buena Vista FL and an $87 million addition to a convention center hotel in Chicago IL.  Store construction in January was able to move up 12% from its depressed December amount, and office construction advanced 20% with support coming from the January start of a $113 million office building in Cambridge MA and an $85 million data center in West Des Moines IA.  The manufacturing plant category in January plunged 39%, sliding back from the improved activity that was reported during the fourth quarter of last year.

Residential building, at $134.5 billion (annual rate), dropped 8% in January.  Multifamily housing fell 26%, retreating from the elevated volume reported in December.  January's amount for multifamily housing was still 5% above the average monthly pace for 2011 as a whole, a year in which the annual total for multifamily housing climbed 23%.  The largest multifamily projects reported as January starts were the following – a $90 million apartment village in San Jose CA, a $78 million apartment building in Los Angeles CA, and a $73 million university-related apartment complex in Washington DC.  Single family housing in January settled back 1%, as the result of this regional pattern – the Midwest, down 4%; the South Atlantic, down 3%; the Northeast, down 2%; the West, up 1%; and the South Central, up 2%.  Single family housing was able to show some gains during the latter months of 2011, with the average pace in last year's second half up 7% relative to the very weak first half, but Murray noted that "January's
essentially flat activity indicates that single family housing has yet to move from what is still a very depressed level to even a modest recovery."

Nonbuilding construction in January increased 3% to $127.9 billion (annual rate).  Much of the upward lift came from electric utilities, which jumped 36% relative to a lackluster December.  The electric utility category for 2011 as a whole surged 46%, reaching a new high in current dollar terms, although activity did slide back during the final two months of last year.  Large electric utility projects that boosted contracting in January were a $1.1 billion solar energy facility in California, a $680 transmission line project in California, and a $150 million wind farm in Indiana.  The public works categories in January showed varied behavior.  Highway and bridge construction dropped 9%, continuing to see the reduced activity that was present for much of 2011, in which the annual amount dropped 5% after stimulus-supported gains in the prior two years.  Water supply construction in January was down 5%, while river/harbor development fell a more substantial 26%.  January gains were posted by sewer construction, up 5%; and miscellaneous public works, up 18%.  The miscellaneous public works category includes a diverse set of project types, such as site work and mass transit, and the January increase reflected these large projects – $406 million for site work at a mining development in Michigan, $234 million for a light rail project in California, and $157 million for work on a commuter rail corridor in Florida.

The 14% decline for total construction on an unadjusted basis in January 2012 relative to January 2011 was due to this performance by major sector – nonresidential building, down 16%; residential building, up 17%; and nonbuilding construction, down 30%.  Last year's January amount for nonbuilding construction featured several massive projects, including a $2.5 billion solar power facility in California and $2.1 billion for work on the  LBJ Freeway in Dallas TX; the comparison to these projects contributed to the 30% year-over-year drop for nonbuilding construction.  By region, total construction for January 2012 compared to January 2011 revealed decreased activity in the South Central, down 32%; the Northeast, down 28%; and the West, down 11%; while gains were reported for the South Atlantic, up 1%; and the Midwest, up 16%.

The 3% decline for total construction on a twelve-month moving total basis, meaning the twelve months ending January 2012 versus the twelve months ending January 2011, was due to this pattern by major sector – nonresidential building, down 4%; residential building, up 4%; and nonbuilding construction, down 8%.  By region, the twelve months ending January 2012 showed the following behavior for total construction compared to the previous twelve months – the Northeast and Midwest, each down 9%; the South Central, down 8%; the West, up 2%; and the South Atlantic, up 9%.

About McGraw-Hill Construction:
McGraw-Hill Construction connects people, projects, and products across the construction industry. For more than a century, it has remained North America's leading provider of project and product information, plans and specifications, and industry news, trends, and forecasts. McGraw-Hill Construction serves more than one million customers in the global construction industry through Dodge, Sweets, Architectural Record, Engineering News-Record, GreenSource, and SNAP. To learn more, visit www.construction.com or follow @mhconstruction on Twitter.

About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies is a leading global financial information and education company that helps professionals and students succeed in the knowledge economy. Leading brands include Standard and Poor's, McGraw-Hill Education, Platts energy information services, and J.D. Power and Associates. The Corporation has approximately 21,000 employees with more than 280 offices in 40 countries. Sales in 2010 were $6.2 billion. Additional information is available at www.mcgraw-hill.com.

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July Construction Recedes 2 Percent

Press Release

July Construction Recedes 2 Percent

New York, N.Y. – August 20, 2013 – New construction starts in July decreased 2% to a seasonally adjusted annual rate of $479.1 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial.  The nonbuilding construction sector, comprised of public works and electric utilities, pulled back in July after being lifted in June by several very large projects.  At the same time, nonresidential building strengthened in July, regaining some of the upward momentum that began to take hold in April and May, while residential building in July showed further growth.  For the first seven months of 2013, total construction starts on an unadjusted basis were reported at $281.7 billion, up 1% from the same period a year ago.  The year-to-date amount for total construction was restrained by a steep decline for new electric utility starts.  If electric utilities are excluded, total construction starts for this year’s January-July period would be up 11%, reflecting a substantial increase for housing as well as moderate improvement for commercial building.

The July statistics lowered the Dodge Index to 101 (2000=100), down from a revised 103 for June.  During the first seven months of 2013, the Dodge Index averaged 102, slightly higher than the full year average for 2012 at 101.  “July’s modest decline for total construction was the result of diminished activity for public works, which can be volatile on a month-to-month basis depending on the timing of very large projects,” stated Robert A. Murray, vice president of economic affairs for McGraw Hill Construction.  “Aside from the public works shortfall, the July statistics provided evidence that the hesitant expansion for construction is proceeding.  Housing continues to show upward movement, and the pace of commercial building continues to pick up gradually from very low levels.  The institutional building portion of nonresidential building, which generally weakened during the first half of 2013, strengthened in July, suggesting that it may now be starting to stabilize after a lengthy decline that’s lasted for more than four years.  While the recovery for construction may be broadening in scope, the process continues to be tenuous given the ongoing sluggish condition of the U.S. economy.”

Nonresidential building in July advanced 8% to $161.3 billion (annual rate).  At the outset of 2013, nonresidential building lost momentum, and then showed moderate growth in April and May before slipping back again in June.  The institutional building sector in July jumped 19%, as several categories reported sizeable gains.  Healthcare facilities in July climbed 25%, boosted by groundbreaking for such large projects as a $450 million hospital tower in Stamford CT, a $340 million medical center in Fargo ND, a $130 million hospital tower in Springfield MO, and a $120 million hospital tower in Washington DC.  This stands in contrast to the generally fewer large-scale hospital projects that were being reported as construction starts during the first half of 2013, when compared to what took place in 2012.  The transportation terminal category in July surged 111%, helped by the start of the $650 million Central Subway Station in San Francisco CA and $105 million for work at Terminal 3 at San Francisco International Airport.  The public buildings category, which has recently been very weak, jumped 46% in July with the start of a $137 million renovation project at the Minnesota State Capitol Building in St. Paul MN.  Educational facilities, the largest institutional category, also contributed in July with a 3% increase, rising for the second month in a row after weak activity in early 2013.  Large educational facility projects that were included as July starts included $218 million for phase 3 of the University of Maryland Health Sciences Research Facility in Baltimore MD, a $92 million high school in Concord MA, and an $85 million high school addition in Bellevue WA.  Institutional categories that weakened in July were churches, down 3%; and amusement-related construction, down 7%.

The commercial categories in July slipped 2%, due to varied behavior by project type.  Office construction in July dropped 15%, although this followed a substantial 44% increase in June, and the level of activity in July was 21% higher than the average monthly pace for this category during 2012.  Large office projects that were included as July starts included $550 million for the office portion of the State Farm Headquarters complex in Richardson TX, plus two office buildings for Amazon in Seattle WA valued respectively at $133 million and $111 million.  Hotel construction in July fell 30%, registering comparatively weak activity after the elevated pace earlier in 2013.  Store construction in July edged up 2%, helped by the start of a $70 million IKEA store in Merriam KS, while warehouse construction climbed 36%.  The manufacturing plant category in July posted a further decline, falling 31% as the slower activity witnessed so far in 2013 continued.  The largest manufacturing plant project reported as a July start was a $63 million ethanol refinery in Florida.

Residential building, at $204.1 billion (annual rate), grew 3% in July.  Multifamily housing rebounded 20% after sliding 21% in June, regaining the heightened activity that was present earlier in 2013.  Large multifamily projects that reached groundbreaking in July included a $390 million condominium complex in New York NY, a $153 million mixed-use development in Boston MA, and a $117 million apartment complex in San Diego CA.  Through the first seven months of 2013, the leading metropolitan areas for multifamily construction starts (ranked by dollar volume) were the following – New York NY, Washington DC, Boston MA, Miami FL, and Dallas-Ft. Worth TX.  Single family housing in July slipped 1%, and over the past several months has essentially leveled off after the strong month-to-month gains that were reported throughout 2012 and early 2013.  July’s volume of activity was still high by last year’s standards – up 26% from the average monthly pace for single family housing reported during 2012.  By region, single family housing in July showed greater activity in the Midwest, up 4%; but declines in the Northeast, South Central, and West, each down 2%; and the South Atlantic, down 4%.  Murray noted, “The rise in mortgage rates in late spring generated some concern about the prospects for single family housing, but mortgage rates have since eased back and the inventory of new homes for sale remains very low, which should encourage greater single family construction in the months ahead.”

Nonbuilding construction in July dropped 18% to $113.8 billion (annual rate).  The public works portion of nonbuilding construction fell 20%, retreating after its 40% surge in June.  Bridge construction in July was down 54%, following the robust amount of construction starts in June that included $1.6 billion for work on the Ohio River Bridges in the Louisville KY and the southern Indiana area, plus several other large bridge projects located in Massachusetts, Texas, and New York.  Highway construction in July also pulled back from an elevated June, sliding 22%.  Even with the reduced activity reported during July, highway and bridge construction through the first seven months of 2013 still maintained a 12% lead over the same period a year ago.  Sewer construction also registered weaker activity in July, falling 13%.  Public works categories that showed greater activity in July were dams and river/harbor development, up 2%; miscellaneous public works (site work, pipelines, rail projects), up 3%; and water supply systems, up 32%.   The electric utility and gas plant category in July managed to increase 11% from very weak activity in June, helped by the start of a $270 million gas plant in Colorado and a $200 million solar power plant in New Mexico.  The amount of electric utility and gas plant construction continues to be much lower than last year, with July’s volume down 82% from the average monthly pace for this category during 2012.

The 1% increase for total construction starts on an unadjusted basis during the first seven months of 2013 relative to last year was the result of divergent behavior by the three main construction sectors.  Residential building, up 29% year-to-date, continues to lead the way during 2013, with single family housing up 31% and multifamily housing up 21%.  Nonresidential building saw its year-to-date shortfall relative to 2012 narrow, coming in 3% below last year at the seven-month mark.  The major segments for nonresidential building showed the following year-to-date performance – commercial building, up 6%; institutional building, down 8%; and manufacturing plant construction, down 9%.  Nonbuilding construction dropped 22% year-to-date, as a 69% reduction for electric utilities far outweighed a 5% increase for public works.

By geography, total construction starts in the first seven months of 2013 revealed gains in three regions – the West, up 9%; and the South Central and the Northeast, each up 8%.  Year-to-date declines were reported for two regions – the Midwest, down 1%; and the South Atlantic, down 14%.  If electric utilities are excluded from the construction start statistics in the South Atlantic, then that region would register a 20% year-to-date gain.

About McGraw Hill Construction:
McGraw Hill Construction’s data, analytics, and media businesses – Dodge, Sweets, Architectural Record, and Engineering News-Record – create opportunities for owners, architects, engineers, contractors, building product manufacturers, and distributors to strengthen their market position, size their markets, prioritize prospects, and target and build relationships that will win more business. McGraw Hill Construction serves more than one million customers through its trends and forecasts, industry news, and leading platform of construction data, benchmarks, and analytics, including Dodge MarketShare, Dodge BuildShare, and Dodge SpecShare. To learn more, visit www.construction.com.

About McGraw Hill Financial:
McGraw Hill Financial, a financial intelligence company, is a leader in credit ratings, benchmarks, and analytics for the global capital and commodity markets. Iconic brands include: Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, J.D. Power & Associates, and McGraw Hill Construction. The Company has approximately 17,000 employees in 27 countries. Additional information is available at www.mhfi.com.

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