All three major sectors declined in September with residential leading the tumble

HAMILTON, NJ —October 18, 2023 — Total construction starts fell 6% in September to a seasonally adjusted annual rate of $1.2 trillion, according to Dodge Construction Network. Nonresidential starts lost 4%, residential starts declined 6%, and nonbuilding starts fell 9%.

Year-to-date through September 2023, total construction starts were 3% below that of 2022. Residential and nonresidential starts were down 17% and 7%, respectively; however, nonbuilding starts were up 25% on a year-to-date basis. For the 12 months ending September 2023, total construction starts were unchanged. Nonbuilding starts were 22% higher, and nonresidential building starts gained 3%. Conversely, on a 12-month rolling basis, residential starts posted a 16% decline.

“Risks continue to mount for the construction sector,” said Richard Branch, chief economist for Dodge Construction Network. “Over the last 12 months, construction starts have essentially froze as rates increased and credit tightened. The industry needs further adjusting as rates are expected to stay higher for longer, along with the potential for higher energy costs and continued political uncertainty. A return to broad-based growth in construction starts is still some time away.”

Nonbuilding
Nonbuilding construction starts decreased in September, falling 9% to a seasonally adjusted annual rate of $345 billion. Highway and bridge starts lost 15% and environmental public works starts fell 29%. Not all sectors fell, however: miscellaneous nonbuilding starts rose 4%, and utility/gas plant starts gained 14%. Year-to-date through September, nonbuilding starts were up 25%. Utility/gas plants rose 58%, and miscellaneous nonbuilding starts were up 23%. Highway and bridge starts gained 13%, and environmental public works rose 16%.

For the past 12 months ending in September 2023, total nonbuilding starts were 22% higher than that of September 2022. Utility/gas plant and miscellaneous nonbuilding starts rose 35% and 22%, respectively. Highway and bridge starts, in addition to environmental public works starts, were both up 18% on a 12-month rolling sum basis.

The largest nonbuilding projects to break ground in September were the $4.5 billion Sun Zia transmission line across Arizona and New Mexico, the $525 million fourth phase of the Cedar Springs wind farm in Converse County, Wyoming, and the $485 million Prospect Lake Clear Water Center in Fort Lauderdale, Florida.

Nonresidential

Nonresidential building starts fell 4% in September to a seasonally adjusted annual rate of $459 billion. Commercial starts rose 6% due to strength in data center work (classified as an office structure in the Dodge database) and retail. Institutional starts fell 8% in September despite a healthy gain in education starts, and manufacturing starts declined 13%. On a year-to-date basis through September, total nonresidential starts were 7% lower than that of 2022. Institutional starts gained 5%, while commercial and manufacturing starts fell 6% and 31%, respectively.

For the past 12 months ending in September 2023, total nonresidential building starts were 3% higher than that ending September 2022. Manufacturing starts were 8% lower. Institutional starts improved by 8%, and commercial starts gained 4%.

The largest nonresidential building projects to break ground in September were the $2.5 billion Hyundai/SK EV battery plant in Cartersville, Georgia, a $1.1 billion prison in Elmore, Alabama, and the $1 billion Microsoft data center in Mount Pleasant, Wisconsin.

Residential

Residential building starts fell 6% in September to a seasonally adjusted annual rate of $394 billion. Single family starts gained 1%, while multifamily starts lost 17%. On a year-to-date basis through September 2023, total residential starts were down 17%. Single family starts were 19% lower, and multifamily starts were down 12%.

For the past 12 months ending in September 2023, residential starts were 16% lower than in 2022. Single family starts were 22% lower, while multifamily starts were down 5% on a rolling 12-month basis.

The largest multifamily structures to break ground in September were the $385 million first phase of the South Pier Residential Towers in Tempe, Arizona, the $275 million first phase of the Casa Bella Condominiums in Miami, Florida, and the $260 million Chapel Block mixed-use development in Philadelphia, Pennsylvania.

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

Watch Chief Economist Richard Branch discuss September Construction Starts here.

September 2023 CONSTRUCTION STARTS

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Institutional planning drives DMI higher, while commercial planning declines

HAMILTON, N.J. – October 6, 2023 — The Dodge Momentum Index (DMI), issued by Dodge Construction Network, improved 3% in September to 182.5 (2000=100) from the revised August reading of 178.0. Over the month, the commercial component of the DMI fell 1%, while the institutional component increased 9%.

“Solid demand for data centers, life science labs and hospitals supported the uptick in nonresidential planning activity last month,” said Sarah Martin, associate director of forecasting for Dodge Construction Network. “While month-to-month trends can be volatile, year-to-date trends show an overall decrease in commercial planning, offset by more institutional projects entering the queue. If financial conditions improve in early 2024, steady planning activity should follow.”

Weaker office planning drove the commercial segment of the DMI down, while the acceleration in the institutional segment was supported by stronger education, notably life science buildings, and healthcare planning activity. Year over year, the DMI was 5% lower than in September 2022. The commercial segment was 12% below year-ago levels, while the institutional segment was up 12% over the same time period.

A total of 20 projects valued at $100 million or more entered planning in September. The largest commercial projects to enter planning included the $400 million Platform 16 office development in San Jose, California and the $230 million Waterford Millstone Data Center in Waterford, Connecticut. The largest institutional projects to enter planning included the $927 million UC San Diego Research Park in San Diego, California and phases three and four of the Kilroy Oyster Point Life Sciences Complex in San Francisco, California, valued at a total of $634 million.

The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.

Watch Associate Director of Forecasting Sarah Martin discuss September’s DMI here.

September 2023 DODGE MOMENTUM INDEX

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Double-digit dip in institutional planning deflates August reading

HAMILTON, N.J. – September 8, 2023 — The Dodge Momentum Index (DMI), issued by Dodge Construction Network, declined 6.5% in August to 178.0 (2000=100) from the revised July reading of 190.3. Over the month, the commercial component of the DMI fell 1.6%, while the institutional component fell 14.8%.

“Overall activity remains above historical norms, but weaker market fundamentals continue to undermine planning growth,” said Sarah Martin, associate director of forecasting for Dodge Construction Network. “It’s likely that the full year of tightening lending standards and high interest rates has begun to affect institutional planning, which has otherwise been resistant to these market headwinds. Also, planning in the sector continues to revert from the strong spike in activity back in May. As we move into the final four months of 2023, both commercial and institutional planning will continue to be constrained.”

August saw a deceleration in education, healthcare and amusement planning activity, fueling the sizable decline in the institutional sector. Meanwhile, stronger hotel planning offset weaker office activity, causing a milder regression in the commercial segment over August. Year over year, the DMI remained 4% higher than in August 2022. The commercial and institutional components were up 3% and 7%, respectively.

A total of 22 projects valued at $100 million or more entered planning in August. The largest commercial projects to enter planning included the $322 million Phase 5 of the Northern Virginia Gateway Data Center in Fredericksburg, Virginia, and the $225 million Kroger’s Distribution Center in Las Vegas, Nevada. The largest institutional projects to enter planning included the $420 million Westborough Life Sciences Park in Westborough, Massachusetts, and the $168 million Freeman Health System Hospital in Pittsburg, Kansas.

The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.

Watch Associate Director of Forecasting Sarah Martin discuss August’s DMI here.

August 2023 DODGE MOMENTUM INDEX

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Dodge Construction Network finds automation of key processes uneven, with top benefits reported by those implementing technology solutions

HAMILTON, NJ – August 23, 2023 — A new report from Dodge Construction Network in partnership with Smartapp.com found that 53% of general contractors do not utilize a technology solution for the majority of their processes. The report, “Optimizing Digital Project Management SmartMarket Brief,” reveals that the digital maturity of general contractors varies widely across their core project management processes.

The study compares the performance of two sets of general contractors: those who have automated most of their processes, and those with less automation. It contrasts the contractors that rely on a mix of specific software solutions for every process to those that utilize a platform integrating these core processes together. Together the findings expose a trend toward digital transformation and platform use emerging in construction will help general contractors improve their projects and their businesses.

The study shows:

• The top five benefits reported by those using a technology solution for their project management processes are improved schedule and cost performance, better overall data collection from the jobsite, increased profitability and labor productivity.
• Currently, those who use technology solutions are largely deploying platforms (39%) or commercial point solutions (34%). However, the approach to technology use is fragmented, preventing greater integration.
• 86% of those with higher levels of digital engagement for processes experience notable value from their overall technology stack, far more than those with lower levels of digital engagement (58%).
• There is a striking contrast between those utilizing a platform approach to integrate most of their technology stack (93%) compared with those with fewer solutions integrated together on their platforms (70%).

“The findings show we are still in the midst of transforming how construction projects are managed,” says Steve Jones, senior director of Industry Insights at Dodge Construction Network. “Technology adoption has already taken hold among general contractors, but the value they experience will be magnified as they continue to integrate their solutions together.”

The study also demonstrates the challenges caused by the current lack of integration: 76% report experiencing data integration challenges, with many reporting both construction process and project outcome impacts. This can include, but is not limited to, accurate analytics, good budget control and cost predictability during construction, profitability for the general contractor, and slippage of the final delivery date on their projects. General contractors recognize these challenges, with 77% who find that consolidating functionality into more comprehensive solutions would improve the value of their technology investments.

“Building a sustainable forward-thinking strategy that uses data and technology-based solutions to solve every day jobsite problems is critical,” said Michael Colapietro, CEO & Co-founder at Smartapp. “At Smartapp, we understand the macro level issues of labor shortage, quality of workmanship, high risk work conditions, burnout, and profit erosion that are at play and we see the potential impact true digital transformation can have. The findings in this report illustrate how moving towards a single easy-to-use, unifying platform can better ensure efficiency, productivity and safety across the industry.”

The report contains more detailed findings and analysis can be downloaded here.

 

About Smartapp:

Smartapp is a first-of-its-kind unifying Fusion Platform that can Turn Your Jobsite into a Smartsite, and bring all your construction management automation into one unified place. Our technology connects software, hardware and open APIs together to bring builders a transformative solution that consolidates, connects & configures the tech stack. From project management to safety, communications, automation and finance, we streamline project execution and bridge finance with the field. For more information, visit Smartapp.com

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Large utility project, residential starts power growth to begin Q3

HAMILTON, NJ —August 16, 2023 — Total construction starts rose 17% in July to a seasonally adjusted annual rate of $1.2 trillion, according to Dodge Construction Network. Nonbuilding starts drove the increase, rising 38%, due to the start of a singular large LNG facility. Residential starts rose 20%, while nonresidential building starts lost 6%.

Year-to-date through July 2023, total construction starts were 7% below that of 2022. Residential and nonresidential starts were down 21% and 7% respectively; however, nonbuilding starts were up 20% on a year-to-date basis. For the 12 months ending July 2023, total construction starts were 3% higher than that of 2022. Nonbuilding starts were 21% higher, and nonresidential building starts gained 16%. Conversely, on a 12-month rolling basis, residential starts posted a 17% decline overall.

“Construction starts have plateaued and are making little headway,” said Richard Branch, chief economist for Dodge Construction Network. “Higher interest rates, labor shortages and material prices continue to impact the flow of construction starts — resulting in little forward momentum over the last 12 months. The lag in nonresidential building projects entering the planning stage will slow starts as the year progresses, which should be offset by rising infrastructure activity.”

Nonbuilding

Nonbuilding construction starts surged in July, climbing 38% to a seasonally adjusted annual rate of $440 billion, due mostly to the start of a large LNG facility. Without the mentioned facility included, total nonbuilding starts would have dropped 7%. Environmental public works also rose dramatically, increasing 62% due to the start of a large dock facility. Highway and bridge starts lost 4% in the month. Miscellaneous nonbuilding starts fell 71% following the start of the Buffalo Bills’ new stadium in June. Year-to-date through July, nonbuilding starts gained 20%. Utility/gas plants rose 23%, and miscellaneous nonbuilding starts were up 37%. Highway and bridge starts gained 14%, along with environmental public works rising 19%.

For the 12 months ending July 2023, total nonbuilding starts were 21% higher than the 12 months ending July 2022. Utility/gas plant and miscellaneous nonbuilding starts rose 9% and 32%, respectively. Highway and bridge starts were up 22%, and environmental public works rose 25% on a 12-month rolling sum basis.

The largest nonbuilding projects to break ground in July were the $12 billion first phase of the Rio Grande LNG facility in Brownsville, Texas, a $2.8 billion concrete dock at the Pearl Harbor Naval Shipyard in Hawaii, and the $813 million first phase of the Bellefield Solar farm and battery facility in California City, California .

Nonresidential

Nonresidential building starts fell 6% in July to a seasonally adjusted annual rate of $334 billion. Commercial starts rose 11% on the back of gains in warehouse and parking starts, offsetting a decline in office and hotel starts. Institutional starts were down 11%, with education, dormitories, and religious the only categories to show an increase. Manufacturing starts dropped 39% in July. On a year-to-date basis through July, total nonresidential starts were 7% lower than that of 2022. Institutional starts gained 8%, while manufacturing and commercial starts fell 9% and 31%, respectively.

For the 12 months ending July 2023, total nonresidential building starts were 16% higher than that ending July 2022. Manufacturing starts were 24% higher. Institutional starts improved 20%, and commercial starts gained 8%.

The largest nonresidential building projects to break ground in July were the $405 million Envision AESC BMW components manufacturing plant in Florence, South Carolina, the $370 million Wisteria at Warner Center office building in Los Angeles, California, and the $277 million first phase of an airside concourse at Orlando International Airport in Florida.

Residential

Residential building starts rose 20% in July to a seasonally adjusted annual rate of $414 billion. Single family starts gained 2%, while multifamily starts shot 62% higher. On a year-to-date basis through July 2023, total residential starts were down 21%. Single family starts were 25% lower, and multifamily starts were down 14%.

For the 12 months ending in July 2023, residential starts were 17% lower than in 2022. Single family starts were 25% lower, while multifamily starts were down only 0.1% on a rolling 12-month basis.

The largest multifamily structures to break ground in July were the $1 billion Clarkson Square condo and apartment building in New York City, the $365 million Queensbridge Collective residential tower in Charlotte, North Carolina, and the $358 million Oasis Hallandale tower in Hallandale Beach, Florida.

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

Watch Chief Economist Richard Branch discuss July Construction Starts here.

July 2023 CONSTRUCTION STARTS

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Planning falls in July, but underlying trends point to market split

HAMILTON, N.J. – August 7, 2023 — The Dodge Momentum Index (DMI), issued by Dodge Construction Network, declined 0.9% in July to 193.4 (2000=100) from the revised June reading of 195.1. Over the month, the commercial component of the DMI remained relatively flat, ticking down 0.2%, while the institutional component fell 1.9%.

“While both segments of the Index fell this month, underlying project data points to divergent trends in the nonresidential sector,” said Sarah Martin, associate director of forecasting for Dodge Construction Network. “In comparison to January 2023, commercial planning activity is down 10% through July, while institutional planning is up 16%. Distinctly large institutional projects entering planning in May temporarily inflated month-to-month trends, but activity has since ticked down. As we progress through the remainder of 2023, weaker commercial activity, resulting from tighter lending standards and higher interest rates, will counter sturdier institutional activity, bolstered by public funding and less sensitivity to interest rates.”

All commercial sectors pulled back, or remained flat, over the month of July. Hotel planning saw the largest month-over-month decay, marking four months of consecutive decline in the sector. July also saw a deceleration in the number of education and healthcare projects entering planning — the two largest institutional segments. While two sizable public projects entered planning and pushed activity in the sector to double-digit gains, it was not enough to push the institutional portion of the Index positive. Year over year, the DMI remains 21% higher than in July 2022. The commercial and institutional components were up 13% and 35% respectively.

A total of 15 projects valued at $100 million or more entered planning in July. The largest commercial projects to enter planning included the $400 million Kraft Heinz Distribution Center in DeKalb, Illinois and the $190 million PTC warehouse/distribution facility in San Antonio, Florida. The largest institutional projects to enter planning included the $240 million Lexington High School in Lexington, Massachusetts, the $216 million courthouse improvement project in San Luis Obispo, California, and the $200 million Solano Hall of Justice courthouse in Fairfield, California.

The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.

Watch Associate Director of Forecasting Sarah Martin discuss July’s DMI here.

July 2023 DODGE MOMENTUM INDEX

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