Nonresidential Lifts Construction Starts in June

With the help of a rebound in the nonresidential construction sector, new construction starts in June advanced six percent to a seasonally adjusted annual rate of $549.7 billion—the highest level so far in 2014—according to McGraw Hill Construction.

Nonresidential building in June climbed 12 percent to $214.9 billion (annual rate), after slipping 4 percent in May. The increase had much to do with a volume of manufacturing projects, led by the start of a $3 billion polyethylene plant in Texas. According to McGraw Hill, if the volatile manufacturing category is excluded, nonresidential building in June would be down 11 percent after a 22 percent gain in May.

The commercial building sector in particular retreated in the latest month, sliding 27 percent after a 33 percent spike in May. Office construction dropped 49 percent in June following a robust May. However, June still featured the start of several large office projects, such as a $146 million office tower in Chicago and a $143 million office tower in Philadelphia.

Hotel construction also pulled back in June, dropping 25 percent after a strong May. Stores and warehouses, which were sluggish during much of the first half of 2014, advanced 5 percent and 15 percent, respectively, in June. The largest store project entered as a June construction start was a $138 million shopping center in Redlands, Calif.

The institutional side of the nonresidential market improved 3 percent in June. The healthcare facilities category, which generally weakened in early 2014, increased 36 percent in June as the result of groundbreaking for a $900 million hospital campus in San Francisco. The amusement category also posted a sharp June gain, soaring 62 percent with the support of a $375 million arena in Las Vegas. In contrast, the educational building category in June receded 10 percent, settling back from previous improvement. Even so, the latest month did include the start of several noteworthy public school construction projects.

Residential building, at $214.3 billion (annual rate), grew 3 percent in June. Multifamily housing rebounded 22 percent, as it continues to show an up-and-down pattern around what is still a rising trend. Single family housing, meanwhile, slipped 2 percent in June from May, continuing the essentially flat pattern that emerged toward the end of 2013 and has carried over into 2014.

June’s data raised the Dodge Index to 116 up from 109 in May. During the first two months of 2014, the index had averaged a sluggish 104, but then the pace of construction starts picked up, as the index averaged 112 over the next four months.

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