Dodge Data New Construction Starts in December fell off the pace of growth we had in the previous few months due entirely to a large drop in Energy Infrastructure starts. Total of all starts for 2016 finished as the highest year since 2005. Un-adjusted 2016 totals are only 1% higher than 2015, but 2015 totals have already been adjusted up, so this is an unequal comparison. Annual adjustments are always UP and average about +4% per year. After 2016 totals get adjusted up we might see 2016 growth of 4% to 5% over 2015.
Residential starts in 2016 posted the best year since 2005-2006. Residential starts bottomed in 2009 and have now posted the 7th consecutive year of growth. New starts show an increase of only 6% for 2016, but that follows several years of growth averaging more than 20%/year. I expect after adjustments 2016 residential starts will be revised to 8% growth. Spending has bounced 90% off the bottom in large part due to 17%/year average growth in 2013-2014-2015. Because both starts and spending growth have been so strong, recent percent growth rates are smaller. Expect only 5% spending growth in 2017.
Nonresidential Building new starts in December remained consistent with October and November. Although well below the yearly highs reached in August and September, the final three months helped carry 2016 totals to an 8-year high. Nonresidential Buildings starts for the last six months averaged the highest since the 1st half of 2008. Total starts as posted are up only 4% from 2015 but nonresidential buildings has been subject to the largest adjustment of all sectors. I expect after adjustment nonresidential buildings will show a 2016 increase of about 8% to 9%.
These six Nonresidential Buildings markets, which make up 80% of all nonresidential buildings spending, posted the following growth in starts leading into 2017: Office +37%, Lodging +40%, Educational +11%, Healthcare +21%, Commercial Retail +11% and Amusement/Recreation +21%. For the last 3 years spending combined growth in these six markets has ranged between 9%/yr and 12%/yr. For 2017, expect spending growth of 14%.
Manufacturing, which has an 18% market share of nonresidential buildings, saw new starts decline by 38% in 2016. However, in 2014 and 2015 this market posted the fastest growth of any market in a decade and posted the two highest years on record. In 2015 spending increased 33% to the highest ever recorded for manufacturing buildings. Spending is down 4% in 2016 and is expected to decline 13% more in 2017, but 2017 will still be the 3rd highest year of spending on record.
Non-building Infrastructure monthly new construction starts in December fell to a 10-year low. However, due to strong performance throughout the year, and even though total starts fell 11% from 2015, total Infrastructure starts for 2016 came in at the second highest year on record. 2015 was up 27% from 2014. So, even though headlines will point to an 11% decline in 2016, due to the distribution of spending from backlog, 2017 will post the largest spending increase in 3 years. I expect after adjustments the 2016 decline will be revised up by 3 points to -8%.
Power and Highway/Bridge/Street make up two thirds of non-building infrastructure spending. Power project starts dropped 33% in 2016, but from the highest annual total of starts on record. In 2015, Power starts increased 150% to an all-time high and Highway/Bridge/Street finished just shy of a 6-year high. In the 1st five months of 2015, a years worth of Power projects started and they are not yet completed. That volume is still contributing to infrastructure spending in 2017. It was not unexpected that starts in these markets would be down for 2016. The amount of monthly spending from projects started in 2014 and 2015 in this sector will contribute to spending for several years to come. Spending in 2017 will be the highest ever in this sector, up 4% from 2016.
Dodge Data published new construction starts for January 2017 on Feb 22. Starts are up 12% from December; +1% in residential, +16% in nonresidential buildings and +44% in non-building infrastructure. December was revised slightly. Among the major changes for this January: electric utility +285%; misc public works +222%; transportation terminals +768% (mostly LaGuardia airport terminal); offices +26%; manufacturing -69%; educational -18%.
A major revision was posted to January 2016 starts. They were revised up in total by 23%, a huge move equal to about 1/3 to 1/2 of what we would normally see for a total annual revision. For the last 4 years the annual revision to new starts has averaged +4%. January 2016 residential starts were revised up 9%, nonresidential buildings up 21% and non-building infrastructure up 49%. Even with that, current January 2017 starts are up 10% from January a year ago.
Prior to the data release on Feb. 22, non-building infrastructure 2016 starts were down 11% from 2015. You will note in my commentary above I predicted that would be revised to show only an 8% decline. After one month it has already been revised to only an 8.6% decline. I now expect after all months of 2016 infrastructure starts are revised 2016 will show only a 6% decline from 2015.