Dive Brief:
- Dodge Data & Analytics reported that the value of project starts in November fell 6% from October to a seasonally adjusted annual rate of $638.3 billion, representing the third-straight monthly decline.
- The three sectors that Dodge tracks all had fewer starts in November, with nonresidential building down 5%, residential suffering a 5% decline and nonbuilding seeing a 9% drop after public works fell 21%, erasing the increase it saw in October.
- Year-to-date starts for January to November were valued at $627.2 billion, unchanged from the same period in 2015. If the "volatile" electric utility-gas plant category were removed from the calculations, Dodge said total January-November starts would be up 3% from a year ago.
Dive Insight:
The retreat in November starts drove the Dodge Index down even further to 135, a dive of eight points from a revised October reading of 143. Although the November Index is down almost 20 points from August, it’s still higher (7%) than July’s mark of 126.
According to Dodge Chief Economist Robert Murray, the up-and-down trend of 2016’s Index readings reflects the stops and starts of the industry’s recovery. Despite construction's seesaw movement, Murray said the industry still has some factors in in its corner.
Commercial vacancy rates are still low, school funding — like that seen for California's $9 billion Proposition 51 — has increased and mortgages are at still-low interest rates, which has contributed to stronger millennial demand for housing. However, despite local bond measures and President-elect Donald Trump's hints at increased infrastructure spending, Congress recently kept highway funding at current levels via a continuing resolution, which does not bode well for the already underperforming category of public works.
Despite overall declines, Dodge noted that each sector saw some significant projects get underway in November. Nonresidential starts benefited from the $250 million McDonald’s headquarters in Chicago, the nearly $3 billion Los Angeles Rams stadium in Inglewood, CA, and the new $513 million Long Beach Civic Center in Long Beach, CA. A $209 million residential tower at Bulfinch Crossing in Boston contributed to residential, and nonbuilding saw the start of the $850 million Harbor Bridge project in Corpus Christi, TX. Site work also began at the $155 million Yerba Buena development in San Francisco.
Overall start figures were even more bleak in ConstructConnect's November report, with nonresidential starts falling 22.2% from October. All of the categories that ConstructConnect tracks were down — institutional (-23%), heavy engineering (-31.1%), commercial (-6.3%) and smaller volume industrial (-52.4%). Year-to-date figures were mostly positive, however, with the exception of industrial, which sank 18% from January through November.