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According to the Dodge Construction Network, macroeconomic pressures, along with inflated project costs, are weighing on developers’ appetite for new construction plans.
After a streak of record months, the backlog of future non-residential construction shrank in October. The Dodge Momentum Indexwhich tracks nonresidential projects entering the planning stage and leads real construction spending for a full year, fell 7.1% in October.
Commercial planning activity declined 2.9% for the month, along with a 15.2% drop in institutional projects, the report said. Despite the pullback, the index is still 35% above its annual level through 2024, according to Dodge.
In fact, compared to October last year, planning activity increased by 52%, with commercial and institutional increases of 54% and 49%, respectively. However, yes data center projects are excluded, business growth would stand at 43 percent, said Sarah Martin, associate director of forecasting at Dodge Construction Network, in the statement.
“After several months of record levels, planning momentum slowed in October,” Martin said. “Activity remains strong across the board, particularly for data centers and hospitals.”
Planning activity smoothed by other commercial sectors in October too, including warehouses and hotels, Martin said. Institutional activity, which covers educational projects, also lost momentum in October, he added.
This level of construction planning slowdown could continue in the short term, he said, especially if contractors continue to struggle high project costs.
“Recent growth should not be attributed solely to gains in actual activity. Anticipated increases in labor and material costs are also driving up project expenses and inflating the overall DMI trend,” Martin said. “Over the coming months, Dodge expects activity to continue to slow on average, particularly as macroeconomic risks continue to rise.”
A total of 45 projects valued at $100 million or more entered planning in October, according to Dodge. Major commercial projects include:
- Buildings 1, 2, and 3 of Amazon’s data center campus in Hamlet, North Carolina, each valued at $500 million.
- The $500 million CyrusOne data center in Talkington Township, Illinois.
- The data center Hut 8 Corp. of $500 million in Batavia, Illinois.
The largest institutional projects to enter planning included:
- The $400 million Scripps Memorial La Jolla Medical Tower III in San Diego, California.
- The $260 million SW Life Science Park in Philadelphia.
- The $198 million Mission Hospital expansion in Asheville, North Carolina.
