Construction Starts Hit 10-Month Low, Declining 15 Percent in November

(Photo by David Dykes)

Total construction starts fell 15 percent in November, dropping to a seasonally adjusted annual rate of $927 billion, according to Dodge Construction Network. Nonresidential building starts fell 29 percent during the month, residential starts lost 6 percent, and nonbuilding starts dropped 2 percent.

Year-to-date through November 2023, total construction starts lagged by 4 percent compared to the previous year. Residential and nonresidential starts were down 14 percent and 7 percent, respectively, but nonbuilding starts were up 19 percent.

“Construction starts are deeply feeling the impact of higher rates,” said Richard Branch, chief economist for Dodge Construction Network. “While the Federal Reserve seems poised to start cutting rates in the New Year, the impact on starts will lag. As a result, starts are expected to be weak through the mid-point of 2024 before growth resumes.”

Nonbuilding

Nonbuilding construction starts in November fell 2 percent, amounting to a seasonally adjusted $223 billion. Highway and bridge starts decreased 8 percent, environmental public works starts fell 4 percent, utility/gas starts rose 17 percent, and miscellaneous nonbuilding starts improved by 1 percent.

Year-to-date through November, nonbuilding starts were up 19 percent overall. Utility/gas plants rose 49 percent, and miscellaneous nonbuilding starts increased 18 percent. Highway and bridge starts gained 9 percent, and environmental public works rose 11 percent.

The largest nonbuilding projects to break ground in November were the $834 million I-405 Brickyard to SR 527 improvements in Bothell, Washington, the $406 million second phase of the Sherco Solar Farm in Becker, New Mexico, and a $353 million addition to the Silverhawk Generating Station in Moapa, Nevada.

Nonresidential

Nonresidential building starts decreased 29 percent in November to a seasonally adjusted annual rate of $345 billion. Manufacturing starts plummeted 74 percent following several strong project starts in October.

Commercial starts fell 19 percent with office buildings being the only category to see a gain. Institutional starts rose 7 percent due to a significant uptick in healthcare activity.

Year-to-date through November, total nonresidential starts were 7 percent lower than in 2022. Institutional starts gained 5 percent, while commercial and manufacturing starts fell 13 percent and 18 percent, respectively.

The largest nonresidential building projects to break ground in November were the $1.9 billion Children’s Hospital of Philadelphia Inpatient Tower in Pennsylvania, the $1.6 billion LG Energy Battery Plant in Queen Creek, Arizona, and the $750 million expansion of the Iowa Army Ammunition Plant in Middletown, Iowa.

Residential

Residential building starts declined 6 percent in November to a seasonally adjusted annual rate of $359 billion. Single family starts increased 1 percent, while multifamily starts fell 19 percent.

Year-to-date through November 2023, total residential starts were down by 14 percent, with single-family starts dropping 15 percent and multifamily starts by 12 percent.

The largest multifamily structures to break ground in November were the $200 million 55 Broad Street residential conversion in New York City, the $200 million redevelopment of The Superman Building in Providence, Rhode Island, and the $185 million Union West mixed-use development in Raleigh, North Carolina.

Regionally, total construction starts in November fell in the Midwest, South Atlantic, South Central and West regions, but rose in the Northeast.

Altus Power Announces Closing of 121 Megawatts in Solar Assets from Basalt and Soltage

Altus Power, Inc. (NYSE: AMPS), the commercial-scale provider of clean electric power, announced the closing of its acquisition of Project Hyperion, LLC, comprising of 121 megawatts in solar assets, primarily located in North and South Carolina.

The transaction expands Altus’ presence in the Southeast and introduces new government and municipal entities into the Altus portfolio.

Stamford, Conn.-based Altus Power continues to drive plans to grow its portfolio of commercial-scale solar assets to almost 900 MWs by the end of 2023.

Altus Power originates, develops, owns and operates locally sited solar generation, energy storage and charging infrastructure across the nation, and owns and operates distributed solar arrays across 25 states.

Hyperion was acquired from funds advised by Basalt Infrastructure Partners LLC and Soltage, LLC, a leading owner and developer of distributed solar and storage assets.

Altus Power also announced plans for an incremental draw of $163 million from its Blackstone long-term funding facility at a fixed interest rate of 6.70 percent. The amount includes $89 million to finance Hyperion with the remaining proceeds to provide long-term funding for other asset additions.

Stoel Rives LLP was legal adviser to Altus Power. Marathon Capital Markets LLC served as exclusive financial advisor to Basalt and Soltage.

Winston & Strawn LLP served as legal advisor to Basalt. Foley Hoag LLP served as legal advisor to Soltage. Parker Poe Adams & Berstein LLP was legal advisor to Basalt and Soltage.

Nucor Announces Guidance for the Fourth Quarter of 2023 Earnings

Charlotte-based Nucor Corporation (NYSE: NUE) announced guidance for its fourth quarter ending Dec. 31, 2023.

Nucor expects fourth quarter earnings to be in the range of $2.75 to $2.85 per diluted share. Nucor reported net earnings of $4.57 per diluted share in the third quarter of 2023 and $4.89 per diluted share in the fourth quarter of 2022.

Company officials said earnings in the fourth quarter of 2023 are expected to decrease compared to the third quarter of 2023 due to lower pricing and volumes across all three operating segments.

In the steel mills segment, they expect the decrease in realized pricing to be most pronounced at Nucor’s sheet and plate mills.

In the steel products segment, the officials expect decreased earnings due to moderating average selling prices at most of the product groups within the segment and lower volumes.

Earnings for the raw materials segment are expected to decrease in the fourth quarter of 2023 as compared to the third quarter of 2023 due to lower pricing for raw materials and planned outages at the company’s DRI facilities.

Included in the results for the fourth quarter of 2022 was an after-tax net benefit of $60.4 million, or $0.24 per diluted share, related to state tax credits and an after-tax net benefit of $88.0 million, or $0.34 per diluted share, related to a change in the valuation allowance of a state deferred tax asset.

Also included in the fourth quarter of 2022 results was a pre-tax $96.0 million, or $0.29 per diluted share, write-off of the remaining carrying value of the company's leasehold interest in unproved oil and gas properties that is included in the raw materials segment. 

Last year, Nucor’s board of directors approved construction of a galvanizing line at Nucor Steel Berkeley in South Carolina to support the company's strategy to expand its capabilities and grow participation in the automotive and consumer durables markets.

The $425 million investment was expected to create more than 50 full-time jobs, with start-up expected in mid-2025.

Capital Square, Method Co. Mark Construction Milestone with Topping Out of Boutique Hotel in Charleston Opportunity Zone

Capital Square, one of the nation's leading sponsors of tax-advantaged real estate investments and an active developer and manager of housing communities, and Method Co., a real estate development, design and management company, announced the topping out of their new project, a 50-unit, boutique hotel in downtown Charleston.

The as-yet-unnamed development, at 529 King Street within a qualified opportunity zone, is expected to be completed by summer 2024.

529 King Street is a five-story project featuring a mix of studio, one-, two- and three-bedroom units.

The development totals approximately 52,700 square feet with 32,000 net rentable square feet of hotel and retail space. The project features an interior courtyard and a rooftop lounge that will be open to the public. The facade offers a modern interpretation of the historic Victorian-era aesthetic that's prevalent in Charleston.

Community amenities will include 44 valet-operated parking spaces, a library and coworking space.

The project marks Method Co.'s second development in Charleston after The Pinch, a boutique hotel that debuted in April 2022.

Charleston culinary veteran Jason Stanhope, formerly of FIG, will oversee food and beverage operations at the rooftop lounge. Stanhope, a James Beard Award winner, is currently the executive chef of Lowland and the Quinte.

529 King Street was funded with proceeds from Method Co. as well as from Capital Square's fourth qualified opportunity zone fund, CSRA Opportunity Zone Fund IV, LLC.

Capital Square is an active sponsor of qualified opportunity funds and recently launched CSRA Opportunity Zone Fund VII, LLC to fund the development of a multifamily development in the Scott's Addition neighborhood of Richmond, Virginia, and CSRA Opportunity Zone Fund VIII, LLC to help finance the construction of a Class A apartment community in Knoxville, Tennessee.

Capital Square's opportunity zone funds have initiated in excess of $590 million in development value to-date.

Opportunity zones were created to stimulate long-term private investments in low-income urban and rural communities nationwide. Conceived as part of the Tax Cuts and Jobs Act of 2017, opportunity zone funds are intended to help foster economic growth by providing tax benefits to incentivize private investments in designated opportunity zones.

Capital Square partnered with Morris Adjmi Architects and LS3P as building architect, BL Harbert as general contractor and Method Co. as the co-developer and operator of the project.

Since its formation in 2012, Capital Square has raised more than $3 billion in equity from investors for its tax-advantaged real estate investment offerings.

The company has consistently ranked as one of the leading sponsors of Delaware statutory trust (DST) investment programs for investors seeking the advantages of Internal Revenue Code Section 1031 exchanges and is also an active sponsor of qualified opportunity zone funds, development LLC's and Capital Square Apartment REIT, a real estate investment trust that invests in multifamily communities throughout the Southeast.

The principals of Method Co. have been developing, owning, and managing Class A real estate for over 30 years and developed over 7 million square feet of various asset types throughout the United States.

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