While the overall business climate feels soft, some segments of the construction market are very definitely bucking this trend.
Plans for multiple LNG export terminals along the Gulf Coast valued in the billions of dollars and the construction of signature luxury condo towers and office buildings topping the billion-dollar market overshadow and otherwise pedestrian construction market in 2015. But the growth in this segment of the energy market and urban redevelopment on the scale we are seeing in New York, Boston and the Bay Area are sure to have a positive trickle-down effect in other businesses in near these mega-projects.
Electrical Marketing’s editors searched for data on construction projects of at least $100 million in total value that made news during the past four weeks, and it was easy to find 25 projects of this size either on the drawing boards or that recently broke ground. As you can see in the chart on page 2, at least 10 U.S. construction projects are either underway or planned that are said to be of at least $1 billion in total contract value, including three LNG export terminals, two data centers, one large airport renovation and several residential or commercial buildings sure to change the skylines of New York and Boston. Anyone who has visited either of these two cities during the past few months probably saw construction cranes hovering over at least one or two of these projects. Boston has projects planned or underway near its harbor, financial district and Copley Square, while the Big Apple is seeing all sorts of action in lower Manhattan at the World Trade Center site; Manhattan’s West Side near the Hudson Yards project; and along Central Park South.
And as previously reported in EM, the Bay Area has its share of mega-projects, with the SalesForce office tower under construction in downtown San Francisco; Apple’s new headquarters in Cupertino, Calif.; and Google’s plans for a new headquarters in Mountain View, Calif. Most recently, plans were approved across San Francisco Bay for a $500 million residential/commercial waterfront development in Alameda, Calif. on 68 acres of waterfront with 800 homes.
While these large projects grabbed plenty of headlines over the past few weeks, the overall pace of future growth is a bit slower. The Momentum Index recently published by Dodge Data & Analytic held steady at 122.3 (2000=100) in May, according to Dodge Data & Analytics. The Momentum Index is an interesting monthly indicator to watch because it measures the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.
Said a Dodge press release, “After rising over the course of 2014, the Index thus far in 2015 has been basically flat, consistent with other measures highlighting sluggish economic conditions. Even with this near term pause, the Index in May was still up 6.1% compared to the same month a year ago. Several factors are expected to help the Index move beyond its current plateau and regain an upward track later in 2015, including further improvement by market fundamentals for commercial real estate and the increased funding support for construction projects coming from state and local governments.”
The Dodge Data & Analytics release said that in May planning activity by sector was varied, with institutional building climbing 3.1% while commercial building fell 2.2%. “Within the institutional sector there were eight projects that exceeded $100 million, including the $466 million Vassar Brothers Medical Center Pavilion in Poughkeepsie, N.Y., and the $400 million Covenant Medical Center Tower in Lubbock, Texas,” the release said. “There were six commercial projects in May valued at over $100 million.”