Dmi Graphs 7 10

Dodge: Starts Slipped, Index Fell in June

July 25, 2023
Most construction categories were lower nationally for the month, but single-family starts were a bright spot. Dodge Momentum Index declined 2.5%.

PRESS RELEASES

HAMILTON, NJ —July 21, 2023 — Total construction starts fell 9% in June to a seasonally adjusted annual rate of $1 trillion, according to Dodge Construction Network. Nonresidential starts led the downturn, falling 14%. Nonbuilding starts fell 9%, and residential starts lost 4%.

Year-to-date through June 2023, total construction starts were 5% below that of 2022. While residential and nonresidential starts were down 24% and 2%, respectively, nonbuilding starts gained 29%. For the 12 months ending June 2023, total construction starts were 9% higher than that of 2022. Nonbuilding starts were 34% higher, and nonresidential building starts gained 25%. However, on a 12-month rolling basis, residential starts posted a 17% decline overall.

“Construction starts are oscillating — up one month and down the next,” said Richard Branch, chief economist for Dodge Construction Network. “The presence, or absence, of mega-projects is a key influencer in this trend. Nevertheless, high interest rates and tightening lending standards are leading to uncertainty among owners and developers, also creating hesitation among stakeholders, leading them to carefully assess whether projects will break ground. These conditions will persist through the remainder of the year — meaning little forward motion in construction starts.”

Nonbuilding

Nonbuilding construction slipped 9% in June to a seasonally adjusted annual rate of $317 billion. Despite a strong showing in May, utility/gas plants fell 43%, and highway and bridge starts dropped 22%. Conversely, environmental public works starts gained 1%, and miscellaneous nonbuilding starts more than doubled due to the start of a large stadium project. Year-to-date through June, nonbuilding starts gained 29%. Utility/gas plants rose 61%, and miscellaneous nonbuilding starts were up 60%. Highway and bridge starts also gained 19%, along with environmental public works rising 14%.

  • Watch Dodge chief economist Richard Branch discuss June starts here.

For the 12 months ending June 2023, total nonbuilding starts were 34% higher than that of  2022. Utility/gas plant starts rose 62%, and miscellaneous nonbuilding starts were 45% higher. Highway and bridge starts were up 25%, and environmental public works rose 24% on a 12-month rolling sum basis.

  • The largest nonbuilding projects to break ground in June were the $2.6-billion Matterhorn Express Pipeline in Texas, the $1.4-billion Buffalo Bills stadium in Orchard Park, NY, and the $930-million Bissell & Lemay wastewater treatment plant in St. Louis, MO.

Nonresidential

Nonresidential building starts shrank 14% in June to a seasonally adjusted annual rate of $348 billion following an aggressive growth in manufacturing starts in May. Commercial starts fell 6% with gains in office and hotel offset by a pullback in warehousing and parking structures, while manufacturing starts lost 67%. Institutional starts gained 15% in June due to healthcare and airport terminal work. On a year-to-date basis through June, total nonresidential starts were 2% lower than that of 2022. Institutional starts gained 9%, while manufacturing and commercial starts fell 6% and 11%, respectively.

For the 12 months ending June 2023, total nonresidential building starts were 25% higher than that ending June 2022. Manufacturing starts were 76% higher, institutional starts improved 21%, and commercial starts gained 9%.

  • The largest nonresidential building projects to break ground in June were the $2.6-billion JetBlue Terminal 6 at JFK airport in Jamaica, NY, the $625-million first phase of the GlobiTech Semiconductor plant in Sherman, TX, and a $558-million hospital tower at Strong Memorial Hospital in Rochester, NY.

Residential

Residential building starts fell 4% in June to a seasonally adjusted annual rate of $344 billion. Single-family starts gained 8%, while multifamily starts lost 23%. On a year-to-date basis through June 2023, total residential starts were down 24%. Single-family starts were 27% lower, and multifamily starts were down 17%.

For the 12 months ending in June 2023, residential starts were 17% lower than that of 2022. Single family starts were 26% lower, while multifamily starts were up 2% on a rolling 12-month basis.

  • The largest multifamily structures to break ground in June were the $500-million 1072 W Peachtree building in Atlanta, GA, the $450-million Pendry-One Ashley condo tower in Tampa, FL, and the $345-million Merchant Building in Columbus, OH.

Regionally, total construction starts in June fell in all U.S. regions except the West and Northeast states.

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Momentum Index Also Down

On July 11, Dodge also reported that its monthly Dodge Momentum Index (DMI) declined 2.5% in June to 197.3 (2000=100) from a revised May reading of 202.4.

Over the month, the commercial component of the DMI rose 3.1%, while the institutional component sunk 10.5%.

“A deceleration in institutional planning caused the Momentum Index to decrease in June,” said Sarah Martin, Dodge's associate director of forecasting. “Project activity in this segment pulled back from the robust highs of the last three months but continued to dwarf year-ago levels. In contrast, growth in the commercial segment may be fleeting, as the continued elevation in interest rates and increasingly tight lending standards weigh down the sector in the latter half of the year.”

Commercial planning in June remained afloat alongside an uptick in data center and hotel planning projects. Institutional planning, on the other hand, was driven lower by a decrease in education and healthcare activity. Year over year, the DMI remains 25% higher than in June 2022. The commercial and institutional components were up 17% and 39% respectively.

A total of 22 projects valued at $100 million or more entered planning in June. The largest commercial projects to enter planning included the $335-million Queensbridge Collective Office Tower in Charlotte, NC, and the $280-million Old Potomac Church Data Center in Stafford, VA. Bolstering the institutional planning queue was the $710-million Medford Life Science Park project in Medford, MA, and the $157-million Center of Innovation building in Emeryville, CA.

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.

For more information, visit www.construction.com.