Nonresidential Construction Climbs While Multifamily Recedes

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The Editors's picture
Nonresidential construction climbs while multifamily recedes

Residential building slipped 4% in June, as both sides of the housing market, single family and multifamily, retreated while other new construction starts in June grew 4% from the previous month to a seasonally adjusted annual rate of $679.9 billion, according to a release.

Through the first six months of 2017, total construction starts on an unadjusted basis were $342.7 billion, down 4% from the same period a year ago.

 If the manufacturing plant and electric/utility gas plant categories are excluded, total construction starts during the first half of 2017 would be up 1% from last year, according to Dodge Data & Analytics. The non-building construction sector rose 8% with the help of elevated activity for electric utilities.

Starts show up and down pattern

 Since last year, total starts have shown an up-and-down pattern on a quarterly basis, including a 6% decline in the fourth quarter of 2016 which was then followed by a 7% increase in this year's first quarter and now a 10% decline in the second quarter.

"A maturing construction expansion is characterized by deceleration in the overall rate of growth, that's often accompanied by up-and-down behavior on a quarterly or monthly basis," Robert A. Murray, chief economist for Dodge Data & Analytics, said in the release.

 "The 11% to 12% yearly increases for total construction starts during the 2012-2015 period were followed by a 4% gain in 2016, and several factors suggest that 2017 should still see modest growth for the year as a whole.  These factors include commercial vacancy rates that remain low as well as greater construction funding coming from the state and local bond measures passed in recent years.

“At the same time, it's become apparent that any impact from a new federal infrastructure program, should one get passed during the latter half of 2017, would benefit construction more in 2018 and 2019," Murray said in the release.

Downward slide in multifamily construction

"Residential building so far in 2017 has been mixed, with some growth for single family housing earlier this year, while multifamily housing appears now to be trending downward after peaking in 2016,” Murray said.

The "no change" for residential building year-to-date was the result of an 8% increase by single family housing offsetting an 18% slide by multifamily housing, according to the release.

Residential building was $274.9 billion (annual rate) in June, down 4%.

Single family housing slipped 4%, continuing to settle back in June from the strengthening that took place during the first two months of 2017.  June's pace for single family housing was still 3% above the average monthly amount reported during 2016.

 By region, the first half of 2017 showed this performance for single family housing compared to last year – the South Atlantic, up 13%; the South Central, up 8%; the Midwest, up 7%; the West, up 5%; and the Northeast, up 1%. 

Multifamily housing construction drops 7 percent

Multifamily housing in June dropped 7%, sliding back for the third month in a row.

 Large multifamily projects that reached groundbreaking in June were led by a $287 million apartment complex in Anaheim CA, a $185 million apartment building in New York NY, and a $164 million condominium complex in Pompano Beach FL.

Through the first half of 2017, the top 10 metropolitan areas ranked by the dollar amount of multifamily starts were:

  • New York, NY
  • Los Angeles, CA
  • Chicago, IL
  • San Francisco, CA
  • Washington, DC
  • Atlanta, GA
  • Miami, FL
  • Philadelphia, PA
  • Boston, MA
  • Seattle, WA

The New York NY metropolitan area, while still the largest multifamily construction market in the nation, dropped 23% during the first half of 2017 compared to last year, which follows the 29% decline reported for all of 2016.

Other metropolitan areas in the top 10 with reduced multifamily construction in the first half of 2017 relative to last year were Chicago IL, Miami FL, Boston MA, and Seattle WA.

About Dodge Data & Analytics

Dodge Data & Analytics is North America's leading provider of analytics and software-based workflow integration solutions for the construction industry. Building product manufacturers, architects, engineers, contractors, and service providers leverage Dodge to identify and pursue unseen growth opportunities and execute on those opportunities for enhanced business performance.

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