Manufacturing and transportation gain the ascendancy, construction begins

Dive brief:

• Total construction starts rose 6% in August to a seasonally adjusted annual rate of $1.3 trillion. according to Dodge Construction Networkdriven by pickups in the transportation manufacturing and construction sectors.
• Gains in both sectors helped boost starts in the broader nonresidential construction category by 40% and kept the overall index in positive territory. For example, residential and nonbuilding construction fell 1 percent and 14 percent, respectively, according to Dodge. This bifurcation between sectors tells a story of the poor and the have-nots that is weighing on the industry as a whole.
• “Despite the gain in August, the construction sector is on the upswing,” Richard Branch, chief economist at Dodge Construction Network, said in the statement. “Fears of an impending recession seem to have eased, which should give a confidence boost to the sector. However, higher interest rates, labor shortages and significantly tighter lending standards will weigh on starts in the final quarter of the year.”

Diving knowledge:

On a positive note, it was the second consecutive month-on-month increase for the start of the project, marking a departure from a growth trend again, again. And in the United States, total construction starts in August increased in three of the four regions: the Midwest, the South Atlantic and the West. Starts in south-central geography fell.

The report tracks three categories: non-residential buildings, non-building construction activities and residential buildings.

Manufacturing reinforces non-residential

Nonresidential building starts gained 40% in August to a seasonally adjusted annual rate of $475 billion, Dodge reported, due to the strong increase in manufacturing projects. Even so, the segment would have gained 24% excluding these large manufacturing projects.

Commercial starts rose 8% in August, led by gains in parking structures and hotels, and institutional starts rose 35%, with all sectors but bedrooms rising.

Manufacturing was the real workhorse for the sector in August, which saw its starts jump 285% on the back of two major projects, according to Dodge. Year to August, total non-residential building starts were 9% lower than in 2022, and in the 12 months ending August 2023, total starts of non-residential buildings were 6% higher than those completed in August 2022.

The largest non-residential projects that started in August were:

• The $2.5 billion John Palmour Silicon Carbide Manufacturing Center in Siler City, North Carolina.
• The $2 billion VinFast electric vehicle plant in New Hill, North Carolina.
• The $1.4 billion midfield satellite lounge at Los Angeles International Airport in California.

Non-building weakens

Nonbuilding construction begins to ease in August, falling 14% to a seasonally adjusted annual rate of $380 billion, per Dodge. The decline comes after a July that was boosted Bechtel’s $12 billion LNG project in Brownsville, Texas.

Year to August, non-building starts gained 22%, and in the 12 months ending August 2023, total non-building starts were 20% higher than in August 2022, Dodge reported.

The most important projects that have started during the month were:

• The $3.5 billion TransWest transmission project spanning Wyoming, Colorado, Utah and Nevada.
• The $2.9 billion Mid-Barataria Sediment Diversion Projects in Port Sulphur, Louisiana.
• New England’s $1.5 billion Clean Energy Connection power line to Maine.

Housing shrinks amid high demand

Residential building starts fell 1% in August to a seasonally adjusted annual rate of $418 billion, according to Dodge. Single-family starts gained 2%, while multi-family starts lost 5%. The demand for apartments has soared this summeraccording to the Associated Press.

In the year to August 2023, total residential starts were down 18% and in the 12 months ending August 2023, residential starts were 17% lower than in 2022.

The largest multi-family structures that broke ground in August were:

• The $530 million Hub on Campus mixed-use building in Knoxville, Tennessee.
• The $425 million 250 Water Street mixed-use tower in New York City.
• The $340 million Ritz Carlton Residences in North Palm Beach, Florida.

As it begins to look back at what has already happened, the American Institute of Architects’ Architecture Billing Index tracks building design work for jobs to come. Its results, which lead to actual construction in nine to 12 months, dropped almost two pointsfrom 50 to 48.1, indicating a future decline in activity.

Similarly, the group highlighted the difficult economic conditions ahead.

“Business conditions at architecture firms continue to be sluggish,” Kermit Baker, AIA’s chief economist, said in a statement to Construction Dive. “We also get new project work at architectural firms [as] Ongoing project activity remains stagnant in a relatively narrow range with very little month-to-month variation.”