Dive Brief:
- Total construction starts rose 1% in January at a seasonally adjusted annual rate of $1.16 trillion, according to the Dodge Construction Network.
- Even with The big rebound in December where starts rebounded 20% from a 10-month low in November, January’s marginal increase means construction activity is still not treading water over the past year and is about 1% lower than in January of 2023.
- “Construction starts are struggling to make headway in the new year,” said Richard Branch, chief economist at Dodge Construction Network. “Construction starts will continue to struggle in early 2024 as higher interest rates and tight credit standards are holding back projects moving through the planning cycle to start.”
Diving knowledge:
Despite the slow start this year, Branch said interest rate cuts expected in the second half of 2024 should push some of these projects into the planning queue to start, leading to an increasing trend in construction activity as the year progresses.
But until these cuts provide some relief, construction activity could remain somewhat limited. The American Institute of Architects Architecture Billing Indexwhich tracks architectural design activity and leads actual construction nine to 12 months, indicated continued softness as business conditions continued to decline, said Kermit Baker, AIA chief economist.
“It now marks the longest period of declining bills since 2010,” Baker said. “Although it is reassuring that the pace of this decline is less rapid and that the economy as a whole showed improvement in January.”
The manufacturing boom is leading the charge
After a 75% increase to close out the year in 2023, manufacturing starts posted another 26% jump in January, according to Dodge.
Despite the increase in activity, however, nonresidential construction starts as a whole lost 2 percent in January to a seasonally adjusted annual rate of $483 billion.
That drop came largely from a 14% decline in commercial starts, which include retail, office and warehouse projects. Institutional starts, which consist of healthcare and education projects, also lost 1%, according to Dodge.
In the 12 months ending in January 2024, non-residential building starts fell 5%. Manufacturing starts declined 20% and commercials fell 10%, while institutional starts were 9% higher.
The largest non-residential building projects that began in December included:
- Texas Instruments $5.5 billion manufacturing plant in Lehi, Utah.
- Construction of the $2.6 billion Terminal B at Houston’s George Bush Airport.
- $1 billion BlueOval battery plant in Marshall, Michigan.
Non-buildable starts keep resurfacing
Nonbuilding starts, which include highways, streets, bridges, gas plants and environmental public works, continued to grow in January, rising 9% to a seasonally adjusted annual rate of $280 billion.
Environmental public works rose 38%, while highway and bridge construction improved 9%, the report said, but gas plant and utility activity fell 35% in January
In the 12 months ending January 2024, total non-building starts rose 17%. According to the report, highway and bridge starts increased 11%, environmental public works increased 10% and gas plant and utility starts improved 36%.
The largest non-building projects that began in January included:
- The $610 million Nelson Wastewater Treatment Facility in Mission, Kansas.
- The $517 million wastewater treatment plant in Ewa Beach, Hawaii.
- The $473 million I-10 bridge in Pensacola, Florida.
Multifamily begins to improve to begin in 2024
Residential starts as a whole, including single-family and multi-family, were relatively flat from December to January at a seasonally adjusted annual rate of $393 billion.
But multifamily starts rose 6% in January, while single-family starts fell 3%, the report said. For the 12 months ending January 2024, single-family starts remained 8% lower, while multi-family starts also fell 7%.
The largest multifamily buildings that opened in January included:
- The $1.5 billion One Beverly Hills tower in Beverly Hills, California.
- The $447 million Olara Condominium tower in West Palm Beach, Florida.
- The $330 million The Exchange at Spring Hill Station in Tysons, Virginia.
