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Electricalmarketing 3012 Gettyimages 451816748constructioncranes595
Electricalmarketing 3012 Gettyimages 451816748constructioncranes595
Electricalmarketing 3012 Gettyimages 451816748constructioncranes595
Electricalmarketing 3012 Gettyimages 451816748constructioncranes595
Electricalmarketing 3012 Gettyimages 451816748constructioncranes595

Dodge Data: Big Nonbuilding Projects Push Construction Starts in February Up 10%

March 25, 2016
Nonbuilding construction in February surged 49% to $200.9 billion (annual rate). The electric power and gas plant category jumped 328%, boosted by the start of the $3 billion third segment (or train) of that LNG export terminal in Freeport, Texas, and the six very large power plant projects.

The Dodge Data & Analytics February construction report offers some good insight into where the construction market is at in early 2016. While the overall data for new construction starts shows a double-digit gain, much of the increase comes from a giant LNG plant the broke ground last month on the Gulf Coast. Dodge says that once you take away that plant, declines in some segments of the construction market appear.

At a seasonally adjusted annual rate of $667.6 billion, Dodge Data & Analytics says new construction starts in February advanced 10% compared to the previous month. Much of the lift in February came from the nonbuilding construction sector, as the Dodge electric power and gas plant category included a $3 billion segment of a liquefied natural gas (LNG) export terminal in Texas, as well as the start of six power plant projects valued each in excess of $200 million.

“The month-to-month pattern of construction starts will often reflect the presence of unusually large projects, and this explains February’s gain relative to January,” said Robert Murray, chief economist for Dodge Data & Analytics. “It also helps to explain the elevated and unsustainable pace of total construction starts during the early months of 2015, and by comparison the substantial year-to-date declines for nonbuilding construction and nonresidential building so far in 2016. During the first two months of 2015, there were 13 projects valued at $500 million or more that reached the construction start stage, compared to five such projects during the first two months of 2016.

“On balance, the current economic environment is still favorable for the continued expansion of construction activity, which may not show up in the year-to-date statistics for total construction starts until the second half of 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. 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.”

Nonbuilding construction. Nonbuilding construction in February surged 49% to $200.9 billion (annual rate). The electric power and gas plant category jumped 328%, boosted by the start of the $3 billion third segment (or train) of that LNG export terminal in Freeport, Texas, and the six very large power plant projects alluded to earlier — a $761 million gas-fired power plant in Connecticut, plus five large solar power projects in Texas, California and Arizona. In addition, February included the start of several large wind farm projects located in Texas and West Virginia.

Hotels. Hotel construction in February climbed 48%, aided by the start of the $357 million hotel portion of the $530 million Gaylord Rockies Resort and Convention Center in Aurora Colo., and the $177 million hotel portion of the $306 million Omni City Center Convention Hotel in Louisville, Ky.

Offices. Office construction in February advanced 25%, with the push coming from five large projects — the $275 million Southport Waterfront Corporate Campus in Renton Wash.; a $266 million office building in Washington, D.C.; a $200 million Facebook data center in Prineville Ore.;  a $178 million research and development campus in Irvine, Calif.;  and a $174 million office building in San Francisco.

During the first two months of 2016, the top five metropolitan areas ranked by the dollar amount of new office starts were the following – San Francisco, New York, Washington, Seattle and Boston.

Schools and universities. Educational facilities settled back 13% in February following 19% growth in the previous month. Despite the decline, February did include groundbreaking for several noteworthy educational facility projects, including a $134 million business school facility at Carnegie Mellon University in Pittsburgh and a $90 million high school in Alabaster Ala.

Residential. Residential building in February dropped 5% to $281.3 billion (annual rate), following the 5% gain reported in January. Even with the pullback, February did include groundbreaking for eight multi-family projects valued at $100 million or greater, led by the $233 million Gran Paraiso Bay condominium building in Miami ; a $165 million residential tower in Atlanta; a $143 million condominium building in West New York N.J.

During the first two months of 2016, the leading metropolitan area in terms of the dollar amount of multi-family starts was New York, maintaining its number one ranking for this project type. Rounding out the top five for multi-family construction were the following — Miami, Boston, Atlanta, and San Francisco.