New construction starts in December fell 10 percent to a seasonally adjusted annual rate of $708.9 billion. They declined 7 percent in the prior month.
The December downturn reflects decreases in the three construction sectors, according to Dodge Data & Analytics. For instance: Residential building decreased 8 percent, due to reduced activity in December for both single family and multifamily housing. Nonresidential building dropped 14 percent, as its commercial building segment lost momentum following its heightened November amount. Non-building construction decreased 9 percent, with a steep plunge by the electric utility-gas plant category that outweighed a December rebound for public works.
For 2018, construction starts increased just 0.3 percent to $789.0 billion. That performance followed 7% gains in 2016 and 2017, as well as 11percent to 14 percent gains from 2012 through 2015. The 2018 increase in construction starts was restrained by a 31 percent decrease in the electric utility and gas plant category. If electric utilities and gas plants were excluded, however, construction starts in 2018 increased 2 percent compared to 2017.
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Robert Murray, chief economist for Dodge Data[/caption]
“By recent standards, the overall level of construction starts in 2018 can be regarded as healthy, but the substantially slower rate of growth compared to the prior six years is suggestive of a market that’s close to a peak,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “Last year’s brisk economic expansion enabled market fundamentals for multifamily housing and commercial building to strengthen, which supported more growth for apartment projects, office buildings, and hotels. Single family housing showed improvement early in 2018, but then plateaued and began to recede given affordability constraints.”
Residential building in December was $300.6 billion (annual rate), down 8% from the previous month. Multifamily housing retreated 15%, slipping for the second month in a row after a 19% gain in October. There were four multifamily projects valued at $100 million or more that reached groundbreaking in December, compared to ten such projects in November.
The large multifamily projects in December were led by a $265 million apartment building in Oakland and a $150 million apartment building in Long Beach, Calif. Single family housing in December dropped 5%, settling back from the extended plateau that was present for much of 2018. The December pace for single family housing was down 7% from the average dollar volume for the previous eleven months.
The 2018 amount for residential building was $323.5 billion, up 5%. Multifamily housing grew 8% in 2018, rebounding from the 8% decline that was reported for 2017. The largest multifamily projects that reached groundbreaking in 2018 were the $700 million City View Tower at Court Square in Queens, N.Y., the $580 million multifamily portion of the Winthrop Square Tower in Boston, and the $550 million Queens Plaza Park Apartments in Queens, N.Y.
The top-five metropolitan areas ranked by the dollar amount of multifamily starts 2018, compared with the previous year were New York, up 2 percent; Boston, up 71percent; Washington D.C., up 26 percent; Miami, up 43 percent; and Los Angeles, down 11 percent.
Metropolitan areas that ranked six through 10 were San Francisco, up 23 percent; Seattle, up 25 percent; Dallas-Ft. Worth, up 24 percent; Chicago, down 28 percent; and Philadelphia, up 3 percent.
Eight of the top-ten metropolitan areas for multifamily housing reported gains in 2018 compared to the prior year, which reported only three of the top-ten metropolitan areas reporting gains in 2016. Single family housing in 2018 rose 4 percent, a smaller increase than the 9 percent increase in 2017. The top five regions for single family housing in 2018 were as follows: the West, up 8 percent; the South Atlantic, up 5 percent; the South Central, up 4 percent; the Midwest, up 1 percent; and the Northeast, down 1 percent.
Going forward into 2019, economic growth is not expected to be as strong as what occurred during 2018, which may dampen groundbreaking for multifamily housing and commercial building projects,” said Murray.
