Dive brief:
- Total construction starts fell 6% in September to a seasonally adjusted annual rate of $1.2 trillion, according to the Dodge Construction Network, due to a widespread fall of activity especially around megaprojects.
- According to the report, the decline that pushed global construction from the year starts to September to follow last year’s pace by 3%. The decline follows two consecutive months of gains, suggesting a return to the “up one month and down the next” trend that has lasted through much of 2023.
- “Risks continue to rise for the construction industry,” said Richard Branch, chief economist at Dodge Construction Network. “The industry needs further adjustments as rates are expected to remain higher for longer, along with the potential for higher energy costs and continued political uncertainty. There is still some time to return to the broad-based growth of early of construction”.
Diving knowledge:
While the report begins construction, measuring projects that have progressed, the American Institute of Architects’ Architecture Billing Index tracks building design work for future jobs. This index, which leads real construction nine to 12 months, released its lowest score since December 2020.
That suggests a softening of business conditions, Kermit Baker, AIA chief economist, said in a statement sent to Construction Dive.
“September’s ABI score reflects a marked slowdown in trading conditions in architecture firms, with the sharpest decline seen since the peak of the pandemic,” Baker said. “While more companies are reporting a decline in turnover, the report also shows hesitancy among clients to commit to new projects.”
Manufacturing slips, sends non-residential starts down
Nonresidential starts, which include commercial, institutional and manufacturing projects, fell 4% in September to a seasonally adjusted annual rate of $459 billion. Manufacturing activity, which has supported the non-residential category this year, fell 13%, according to Dodge’s report.
Meanwhile, institutional starts, which include education and healthcare projects, also fell 8% in September.
However, strong activity around data center projects, which fall under the office sector in Dodge’s database, as well as retail work, pushed overall business starts up 6% in September .
In the year to September, total non-residential starts remained 7% lower than at the same time in 2022, according to the report.
The largest non-residential projects that started in September included:
- The $2.5 billion Hyundai and SK EV battery plant in Cartersville, Georgia.
- The $1.1 billion prison in Elmore, Alabama.
- Microsoft’s billion-dollar data center in Mount Pleasant, Wisconsin.
The non-building starts to fall again
After a 14% drop in August, Nonbuilding construction starts, which include highways, bridges, gas plants and public environmental projects, continued their decline in September, down 9%.
Highway and bridge starts fell 15% in September, while environmental public works fell 29%, the report said. On a positive note, gas and utility plant construction starts rose 14% in September.
However, year-to-date, non-building construction starts have shown resilience. The category continues to rise 25% compared to the same period a year ago, led by a 58% jump in gas plant and utility construction and a 13% increase in highway and bridge starts.
The largest non-building projects that began in September were:
- The $4.5 billion Sun Zia transmission line in Arizona and New Mexico.
- The $525 million fourth phase of the Cedar Springs Wind Farm in Converse County, Wyoming.
- The $485 million Prospect Lake Clear Water Center in Fort Lauderdale, Florida.
The building of housing weakens
Residential construction starts followed a 1% drop in August, with a further 6% drop in September. Single-family starts gained 1 percent, but multi-family starts declined 17 percent, according to Dodge.
Year-to-date through September, total housing starts were down 17%. During this period, single-family and multi-family starts were down 19% and 12%, respectively.
The largest multifamily structures that broke ground in September included:
- The $385 million first phase of South Pier Residential Towers in Tempe, Arizona.
- The $275 million first phase of Casa Bella Condominiums in Miami.
- The $260 million Chapel Block mixed-use development in Philadelphia.
