Dodge Data: Energy sector drives 10% gain in Feb. construction starts

Dive Brief:

  • According to Dodge Data & Analytics, February's monthly construction starts increased 10% from January to a seasonally adjusted annual rate of $667.6 billion, with most of the rise due to gains (328%) in the electric power and gas categories of the nonresidential sector. A $3 billion liquefied natural gas terminal, six $200-million power plants and other various energy-related projects were the primary drivers.
  • Dodge said combined January and February 2016 starts were valued at $87.1 billion, down 16% compared to January and February of 2015. But those figures last year were also due to a burst of electric and gas projects.
  • In February, nonbuilding rose 49% to a $200.9 billion annual rate, and nonresidential building ticked up 4% to $185.5 billion. However, residential sank 5% to $281.3 billion, erasing that sector’s January gains.

Dive Insight:

Dodge said that the up-and-down swings of the electric and gas categories were removed, total construction starts would actually be down 1% in February, and the year-to-date figures would reveal a 6% drop.

Dodge Data & Analytics Chief Economist Robert A. Murray said the rise in February starts compared to January shows the "presence of unusually large projects" and highlights the "unsustainable pace" of 2015’s first quarter versus current year-to-date figures. For example, Murray said that in January and February of last year, there were 13 starts of at least $500 million each; whereas, there were only five such projects in January and February of this year.

Overall, Murray said he was optimistic about construction's opportunity for growth this year. "Interest rates continue to be low, more construction-related bond measures have been passed at the state and local government level and the new multi-year federal transportation bill is in place," Murray said in a release. "While there are signs that banks are beginning to tighten standards on commercial real estate loans, at the urging of federal bank regulators, market fundamentals such as occupancies and rents remain generally supportive of new construction."

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Filed Under: Commercial Building Residential Building Economy
Top image credit: from Alstom