Dive Brief:
- Volatility in construction kickoffs persisted in June as new manufacturing groundbreakings fell off a cliff, driving total starts down 9% to a seasonally adjusted annual rate of $1 trillion, according to Dodge Construction Network. That followed a rise of 8% in May.
- A lack of mega-projects is the main cause for this fluctuation of construction starts recently, said Richard Branch, chief economist for Dodge Construction Network.
- “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,” said Branch. “These conditions will persist through the remainder of the year, meaning little forward motion in construction starts.”
Dive Insight:
A lack of mega-projects in the manufacturing sector, which previously had seemed bullet proof amid an onshoring blitz, translated into a 67% nosedive in starts for that project type following aggressive growth in May.
Nonresidential building starts tumbled 14% in June to a seasonally adjusted annual rate of $348 billion. Commercial starts dropped 6% in June with gains in the beleaguered office and hotel sectors, offset by a pullback in warehousing projects, according to the report.
Institutional projects provided a slight silver lining, buoyed by healthcare and airport terminal work to post a 15% gain in June.
Despite the whipsawed monthly results, total nonresidential building starts remain healthy for the year, posting a 25% jump from June 2022. During that same span, starts in manufacturing and commercial remain up 76% and 9%, respectively.
The largest nonresidential building projects to break ground in June include:
- The $2.6 billion JetBlue Terminal 6 at JFK airport in Jamaica, New York.
- The $625 million first phase of the GlobiTech semiconductor plant in Sherman, Texas.
- The $558 million hospital tower at Strong Memorial Hospital in Rochester, New York.
Residential construction activity stumbles
Construction starts in the residential sector continue to post slow results, down 24% in 2023, according to the report.
Residential building starts fell 4% in June to a seasonally adjusted annual rate of $344 billion. For the 12 months ending in June 2023, residential starts dropped 17%, including a 26% drop in single family starts. On the other hand, multifamily starts ticked up 2% on that rolling 12-month basis.
The largest multifamily structures to break ground in June included:
- The $500 million 1072 W Peachtree building in Atlanta, Georgia.
- The $450 million Pendry-One Ashley condo tower in Tampa, Florida.
- The $345 million Merchant Building in Columbus, Ohio.
Volatility in nonbuilding starts
After posting gains in May, nonbuilding construction starts tumbled 9% in June to a seasonally adjusted annual rate of $317 billion.
That’s due to a 43% cratering in utility and gas plants and a 22% drop in highway and bridge starts, according to the report. Conversely, environmental public works inched up 1% in June.
Still, year-to-date through June, nonbuilding starts gained 29%, bolstered by a 61% jump in utility and gas plants, 19% gain in highway and bridges, and 14% increase in environmental public works starts, according to the report.
The largest nonbuilding projects to break ground in June included:
- The $2.6 billion Matterhorn Express Pipeline in Texas.
- The $1.4 billion Buffalo Bills stadium in Orchard Park, New York.
- The $930 million Bissell & Lemay wastewater treatment plant in St. Louis, Missouri.
