Nonresidential Construction Starts Rebound Strongly in March

Apr 17, 2014

Reed Construction Data announced today that the value of March construction starts, excluding residential contracts, surged 46.9% to $23.7 billion after sinking 14.2% in February. This was the highest value for starts since November 2013.

Since the starts data are not seasonally adjusted (NSA), caution should be used in analyzing monthly movements. Year-over-year comparisons are often used, as they remove much of the seasonal effects. Starts were up a modest 0.4% from March 2013. The year-to-date starts data, which totaled $58.6 billion, were down 2.9% from the same period in 2013. The March starts data are an indication that construction is bouncing back from the harsh winter weather, but still has a way to go.

The value of construction starts1 each month is summarized from the Reed database of all active construction projects in the U.S., excluding residential construction. Missing project values are estimated with RSMeans building cost models.

Value of United States Construction Starts
March 2014 — Year to Date
(Reed Construction Data)
  Jan-Mar 2014
($ millions)
% Change
(Jan-Mar 2014 vs
Jan-Mar 2013)
% Change
(Mar 2014 vs
Feb 2014)
Hotel/Motel 1,692 -64.20% 98.30%
Retail 3,784 -31.50% 46.30%
Parking Garage 384 44.80% 490.60%
Amusement 1,062 11.30% 80.90%
Private Office 3,487 60.60% 0.40%
Government Office 2,803 44.20% 223.60%
Laboratory 384 289.30% -25.40%
Warehouse 1,317 20.00% 274.60%
Miscellaneous Commercial 2,237 -61.60% 428.20%
COMMERCIAL 17,149 -24.10% 109.90%
   
INDUSTRIAL (Manufacturing) 906 -41.30% 455.10%
   
Religious 317 -15.20% -26.40%
Hospital/Clinic 4,049 98.20% 111.90%
Nursing/Assisted Living 793 -0.30% 2.60%
Library/Museum 467 16.50% -54.60%
Police/Courthouse/Prison 837 -4.60% 81.60%
Military 868 -11.80% -10.20%
School/College 9,263 -10.80% 20.10%
Miscellaneous Government 835 107.60% 116.90%
INSTITUTIONAL 17,429 7.20% 31.40%
   
Miscellaneous Non-residential 817 24.20% 77.80%
NON-RESIDENTIAL BUILDING 36,301 -11.60% 68.10%
   
Airport 286 -2.40% 194.90%
Road/Highway 8,682 9.30% -15.00%
Bridge 2,660 6.50% -19.70%
Dam/Marine 849 -32.50% 49.50%
Water/Sewage 5,103 15.70% 19.20%
Miscellaneous Civil 4,684 64.40% 155.40%
HEAVY ENGINEERING 22,264 15.70% 19.20%
TOTAL NON-RESIDENTIAL $58,564 -2.90% 46.90%
The table is based on not seasonally adjusted (NSA) data.
Source: Reed Construction Data (RCD).
Table: Reed Research Group and Reed Construction Data – CanaData.


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Commercial starts doubled in March (+109.9%) after plunging 35.9% the previous month. Year-to-date, commercial starts were down 24.1% from the same period last year. To some extent, that comparison obscures the bounce back in commercial starts, since there were some unusually large starts in the first quarter of 2013. The $17.1 billion first quarter commercial starts were the second highest since 2008.

First quarter lodging (hotel and motel) starts were at their second highest level since 2009. An unusually large starts figure in March 2013 is skewing the year-to-date total for this category. Similarly, first quarter retail starts lagged behind first quarter 2013 starts, but were at their second highest level since 2008.

Industrial (manufacturing) building starts, despite a more than five times increase over an unusually low February number, were still down 41.3% on a year-to-date basis. Although the first quarter 2013 starts were on the strong side, they were not unusually so. First quarter 2014 starts were the second lowest on record since the Reed data series began in 2003. The hope is that this year’s slow beginning is weather related and will be offset by stronger numbers in coming months.

Institutional building starts are showing strength largely due to a strong gain in hospital and clinic starts, which more than doubled in March (+111.9%). On a year-to-date basis, these starts were up 98.2% from the same period a year ago. In spite of improvements in March (+20.1%), starts for schools and colleges were down 10.8% on a year-to-date basis from last year.

Heavy engineering (non-building) starts strengthened 19.2% in March. Year-to-date starts were up 15.7% from the same period in 2013. Road and highway starts, although off 15.0% in March, were up 9.3% on a year-to-date basis.

Surprisingly, heavy engineering starts are doing much better than nonresidential building starts. The weather appears to have adversely affected the latter more than the former. As the weather improves, we are looking for starts of both to improve.

We believe the economy is essentially healthy and on a clear upward trajectory. With a growing economy and low long-term interest rates, nonresidential building construction starts (and, therefore, construction activity) are projected to increase, eventually exceeding last year’s starts numbers.


1 A start is determined by taking the announced bid date and adding 30 days. It is then assumed the project will actually break ground within 30-60 days of the start date. Reed continues to follow the project via our network of researchers so if the project is abandoned or re-bid, then the start data are subsequently updated to reflect the new information.

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