THURSDAY, MARCH 23, 2023
Total construction starts rose 6% in February to a seasonally adjusted annual rate of $912.8 billion, according to data recently released by Dodge Construction Network.
Dodge also noted in its report that total construction starts were 17% below that of 2022 for the first two months of this year.
Latest Numbers
According to the release, in February, residential and nonresidential building starts rose 11% and 9%, respectively, and nonbuilding starts declined by 5%. Year-over-year, residential starts were down 31%, nonresidential starts were off 14%, while nonbuilding starts gained 6%.
For the 12 months ending February 2023, Dodge reports that total construction starts were 9% higher than the 12 months ending February 2022. Nonresidential and nonbuilding starts were also 27% and 19% higher, respectively, while residential starts lost 9%.
“February construction starts were a mixed bag that led to marginal growth,” said Richard Branch, Chief Economist for Dodge Construction Network. “Single-family units posted a gain for the first time in 13 months, and manufacturing starts continued to be very robust, showing signs of promise early into 2023.
“However, the downturn in commercial and institutional building starts could very well be the beginning of an anticipated slow-down as the construction sector pulls back in the face of higher interest rates and lagging economic growth. While this ebbing should be comparatively mild, some construction verticals could face extreme stress as the year progresses.”
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Total construction starts rose 6% in February to a seasonally adjusted annual rate of $912.8 billion, according to data recently released by Dodge Construction Network. |
Looking at the largest increase first, residential starts rose to a seasonally adjusted annual rate of $320 billion. Single family and multifamily starts rose 4% and 22% respectively.
Nonresidential buildings starts reportedly grew to a seasonally adjusted annual rate of $368 billion, driven by a 218% gain in manufacturing starts due to the start of a large EV battery plant in Ohio.
However, commercial starts decreased 2% in February as office and parking structure starts fell, offsetting increases in retail, hotels and warehouse activity. Institutional starts also fell during the month, following a decline in education and healthcare projects.
On the flip side, nonbuilding construction starts fell in February to a seasonally adjusted annual rate of $225 billion. Dodge attributes this to a 30% decline in environmental public works starts and a 5% loss in highway and bridge starts, while utility/gas plant starts rose 68% and miscellaneous public works starts were up 6%.
Regionally, total construction starts in February rose in the Northeast, Midwest and South Central regions, but fell in the South Atlantic and West.
Previous Report, Economic Outlook
Last month, Dodge reported that total construction starts fell 27% in January to a seasonally adjusted annual rate of $865.6 billion. Comparatively, total construction was 14% lower last month than the prior year.
The updated information was in contrast to the year-end report issued by Dodge at the end of 2022, anticipating that the construction industry could remain positive this year despite economic uncertainty. However, the company notes that the outlook should remain optimistic, partially due to new large project kickoffs that ended the year.
In breaking down the report by sector, data revealed that nonresidential building starts fell 38%, residential starts lost 20% and nonbuilding starts declined by 16%. Looking at the year-over-year numbers, nonresidential building starts were down 2%, nonbuilding starts rose 10% and residential starts lost 34%.
Dodge reports that for the 12 months ending January 2023, total construction starts were 13% higher than the 12 months ending January 2022. Nonresidential starts were 36% higher, residential starts lost 6% and nonbuilding starts were up 19%.
Dodge reports that total construction starts fell in all five regions in January.
More recently, Dodge issued its Dodge Momentum Index earlier this month, showing that nonresidential building project planning saw an increase in February. According to the analysis, the continued elevation should “provide hope” that construction activity will grow in 2024.
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. According to Dodge, the DMI advanced 1.9% in February to 203.0 from the revised January reading of 199.3. Additionally, the commercial component of the DMI rose 1.4%, and the institutional component increased 2.9%.
Commercial planning in February was reportedly supported by almost 20% growth in office planning activity, as data centers continued to steadily enter the planning queue. Institutional planning was driven higher by growth in education and healthcare projects, notably the continued investment in research laboratories. Dodge reports that 22 projects with a value of $100 million or more entered planning in February.
Additionally, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau released data last week that showed home building increased in February for the first time in five consecutive months, reportedly suggesting that the housing market may be starting to stabilize.
Overall housing starts in February increased 9.8% to a seasonally adjusted annual rate of 1.45 million units. According to Bloomberg, this pace of starts exceeded all forecasts in a survey of economists that had a median projection of 1.31 million.
Within this overall number, single-family starts increased 1.1% to a seasonally adjusted annual rate of 830,000. However, this remains 31.6% lower than a year ago. The multifamily sector, which includes apartment buildings and condos, increased 24% to an annualized 620,000 pace.
Building permits, an indicator of future construction, climbed 13.8% to an annualized pace of 1.52 million units, reflecting gains in permits for both single-family and multifamily projects. However, this number is still 17.9% below the rate this time last year.
The full Monthly New Residential Construction report can be found here.
Tagged categories: Commercial / Architectural; Commercial Buildings; Commercial Construction; Construction; Economy; Good Technical Practice; Market; Market data; Market trends; Ongoing projects; Program/Project Management; Projects - Commercial; Residential; Residential Construction
