Issue link: https://read.dmtmag.com/i/465691
64 • MARCH 2015 • WORLD FENCE NEWS NEW YORK, N.Y. — New con- struction starts in December retreated 16% to a seasonally adjusted annual rate of $568.2 billion, according to Dodge Data & Analytics. The decline follows the 13% in- crease reported for total construction starts in November, when activity reached its highest level in 2014 with the lift coming from several excep- tionally large projects, including a massive lithium ion battery manufac- turing plant, an airport terminal rede- velopment program, and a liquefied natural gas terminal. Both nonresidential building and nonbuilding construction in Decem- ber witnessed substantial percentage declines relative to their robust No- vember amounts. At the same time, residential building managed a modest gain in December with the help of further growth by multifamily housing. For 2014 as a whole, total con- struction starts climbed 7% to $575.3 billion. This continues the pattern of moderate expansion for total con- struction starts reported during the previous two years – 2012, up 10%; and 2013, up 9%. The December statistics produced a reading of 120 for the Dodge Index (2000 =100), compared to 143 in No- vember. For all of 2014, the Dodge Index came in at 122, so while December was down considerably from the pre- vious month it still held close to the average for the full year. "The construction start statistics can often be volatile on a month-to- month basis, giv- en the presence of large projects in any one given month," stated Robert A. Mur- ray, chief econ- omist for Dodge Data & Analytics. "The month of No- vember included four projects valued each in excess of $1 billion, while the largest project in December was a $700 million steel mill. "A better sense of the progression of construction starts over the course of 2014 comes from looking at the data on a quarterly basis," he noted. "Activity weakened during the first quarter of 2014, falling 10% from the end of 2013, but then showed steady improvement as 2014 proceeded, with gains in the second quarter, up 9%; the third quarter, up 5%; and the fourth quarter, up 2%. "The continued expansion for con- struction starts in 2014 carried several notable features," Murray continued. "The nonresidential building sector showed more growth for commercial building, the first increase for institu- tional building after five years of decline, and a surge of man- ufacturing plant projects. Resi- dential building was supported by the strengthening multifamily mar- ket, but was not able to offer the same upward push as in 2012 and 2013 giv- en the flat performance by single fam- ily housing. "Nonbuilding construction showed a slower pace for public works, and while electric utilities lost further momentum the decline was much less severe than in 2013," he said. "Looking ahead to 2015, nonres- idential building should benefit from more private investment directed at commercial building and more fi- nancing for school construction given the passage of recent bond measures. However, the rate of increase for non- residential building will be dampened by a slower pace for energy-related manufacturing projects. "Residential building should see more multifamily housing while re- newed growth for single family hous- ing will need the banking industry to provide potential homebuyers with greater access to home mortgages," Murray noted. "Nonbuilding construction will be helped by the fact that federal spending levels for fiscal 2015 were set in December, but Congress needs to address the stopgap federal trans- portation legislation that expires at the end of May." Nonresidential building in De- cember fell 23% to $196.6 billion (an- nual rate), following its 32% increase in the previous month. Manufacturing plant construction plunged 73%, given the comparison to November that included the $2.5 billion lithium ion battery factory for Tesla Motors in Nevada and a $1.3 bil- lion nitrogen urea plant in Oklahoma. While December did include the start of a $700 million steel mill in Arkansas, the next largest manufac- turing projects were valued at $70 million or less. The commercial building group in December slipped 5%, given a The Dodge Report New construction starts in December pull back 16 percent; annual total advances continued on page 66 "Residential building was supported by the strengthening multifamily market, but was not able to offer the same upward push as in 2012 and 2013 given the flat performance by single family housing." –Robert A. Murray