Dodge: Construction starts fall 2% in August
The value of construction starts fell 2% from July to a seasonally adjusted rate of $711.6 billion in August, according to Dodge Data & Analytics. The decline comes despite a relatively strong showing from the institutional sector.
Institutional projects, which include the $1.6 billion Moynihan Train Hall conversion in New York City, led nonresidential to a 14% monthly gain. However, the increase was not enough to counter the 1% multifamily-driven drop in residential or the 24% slide in the nonbuilding sector for the month. Year-to-date starts were down 1% year-over-year to $481.7 billion driven by a downturn in electric utility and gas plant projects.
The Dodge Index fell three points from July to a reading of 151 in August but was up from a low of 143 during the second quarter, indicating a potential rebound for construction starts in the second half of the year.
One driver behind the strong institutional sector is the ongoing work on airport terminal projects. Several rounds of Airport Improvement Program (AIP) grants this year have helped to spark that work, allowing airports to make the critical infrastructure repairs they need to operate. So far this year, the federal government has doled out $2.3 billion total for such grants.
Still, the real return for airport operations is in massive terminal projects, whether new construction or renovations. Those often amount to $1 billion or more in value, making them beyond the scope of a typical AIP grant.
Last month, the Denver City Council approved a $1.8 billion public-private partnership (P3) with Ferrovial for the $650 million renovation of the Jeppesen Terminal at the Denver International Airport. The deal also included a 34-year concession management contract. Kansas City International Airport, too, is considering a P3 for its $1 billion terminal overhaul, though the project has come under fire for a potentially illegitimate selection process.
P3s' popularity as a project delivery mechanism is growing, as it typically shifts the responsibility of financing, designing, building, operating and maintaining the facility to the private sector, allowing public agencies to spread limited capital funds across a greater number of assets. One of the largest airport P3s is the $4 billion Central Terminal B replacement at LaGuardia Airport, in New York City. The project is being delivered by the Skanska-led LaGuardia Gateway Partners consortium along with the Port of New York and New Jersey.
- Dodge Data & Analytics New Construction Starts in August Recede 2 Percent
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