New Construction Starts in June Swell 11%, Reports Says

Fueling activity was a sharp 57% advance for nonresidential building, while the residential market expanded 4%, according to Dodge Data & Analytics.

NEW YORK CITY — New construction starts in June climbed 11% to a seasonally adjusted annual rate of $896.3 billion, according to Dodge Data & Analytics.

The increase marked the second double-digit gain in a row, following the 15% increase that was reported for May. Boosting activity in June was a sharp 57% advance for nonresidential building, which benefitted from the start of two massive manufacturing plant projects and two massive office building projects.

Residential building in June expanded 4%, helped by growth for multifamily housing. The nonbuilding construction sector (public works and electric utilities) retreated 28% in June, pulling back after the sharp 37% increase reported in May that reflected the start of several large natural gas pipelines and rail-related projects.

Through the first six months of 2018, total construction starts on an unadjusted basis were $395.7 billion, up 1% from the same period a year ago. If the volatile electric utility/gas plant category is excluded, total construction starts during the first six months of 2018 would be up 3% relative to last year.

On the heels of mostly flat activity in April, the strength shown during May and June allowed the second quarter average for total construction starts to be up 3% from the first quarter, which itself was up 2% from the final three months of 2017, states Robert A. Murray, chief economist for Dodge Data & Analytics. It is not expected that July will experience the same support from large projects that took place in June, he continues.

“Several features of the first half of 2018 stand out, as shown by the construction start statistics,” Murray says. “Nonresidential building so far this year has seen gains for manufacturing buildings, educational facilities, and amusement-related facilities, while office building starts have stayed close to last year’s pace.”

Nonresidential building in June was $402.3 billion (annual rate), up 57% from May. The manufacturing building category received an eighteen-fold increase in June relative to a weak May.

The commercial building categories as a group climbed 25% in June, advancing further after moderate gains in April (up 5%) and May (up 7%). Office construction surged 53% in June, led by the start of the $1.8 billion, 64-story Spiral office tower in the Hudson Yards district of New York City, as well as the start of a $665 million, 54-story office building in Chicago.

The institutional building side of nonresidential building increased 11% in June.  Healthcare facilities had a strong month, jumping 103% compared to a lackluster May.

Educational facilities strengthened 16% in June, featuring such university projects as a $230 million facility at the University of Washington in Seattle and a $225 million facility at the University of Oregon in Eugene.

The top five states in terms of the dollar amount of educational facility starts during the first half of 2018 were: Texas, California, New York, Washington and Oregon.

Residential building in June was $323 billion (annual rate), up 4%. Multifamily housing grew 9% in June, advancing for the second month in a row after weak activity in April.

Through the first half of 2018, the top five metropolitan areas ranked by the dollar amount of multifamily starts were: New York City, Miami, Washington D.C., Boston  and Seattle.

Single family housing in June grew 2%, and during the first half of 2018 essentially hovered around the improved level of activity that was reported at the end of 2017. By region, the first half of 2018 showed this performance for single family housing compared to last year: the West, up 11%; the South Atlantic, up 5%; the South Central, up 4%; the Northeast, up 2%; and the Midwest, up 1%.

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