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Dive brief:
- The Dodge Momentum Index, a benchmark that measures nonresidential construction planning, rose 7.9% in July due to notable increases in various commercial and institutional segments, according to Dodge Construction Network.
- Commercial planning, driven by data center work, rose 6.8% in July, while institutional planning, which includes education, life sciences and healthcare construction, rose 11.1% for the month .
- “Potential Fed rate cut in September is increasingly likely, next door slower inflation and weaker labor market conditions,” said Sarah Martin, associate director of forecasting at Dodge Construction Network, in the statement. “This is likely to prompt owners and developers to remain optimistic about market conditions in 2025 and beyond put more projects in the planning queue.”
Diving knowledge:
The continued growth in construction planning, which leads to real construction spending in 12 months, comes as renewed fears emerged this month that the The US economy may be sinking into recession. In contrast to anxiety over last week’s soft jobs report, the planning report provides evidence that landlords and developers are simply waiting for lower rates to deploy capital.
Data center projectsfor example, they continue to have an outsized influence on non-residential planning activity, but momentum is also building in many other important sectors, Martin said in the statement.
For example, beyond the data center tycoon, retail construction planning has also steadily accelerated over the past eight months, reflecting growing confidence in the sector, Martin said. At the institutional level, healthcare projects led growth in July, according to the report.
From an annual perspective, DMI was up 17% from July 2023, with the commercial segment up 35%. During the same period, institutional planning fell by 14%.
A total of 23 projects valued at $100 million or more entered planning during July. The most important projects in the commercial sector include:
- The $483 million Microsoft SAT82 data center in Castroville, Texas.
- The $480 million Yorkville data center campus in Little Rock Township, Illinois.
The largest institutional projects to enter planning included:
- The $325 million UCSF Children’s Hospital renovation in Oakland, California.
- The $278 million Memorial Hermann Cypress Hospital expansion in Cypress, Texas.
But the news is not all rosy. Despite the planning push, business conditions in architectural firms it remains soft. The architectural turnover index, an indicator of construction work in nine to 12 months, declined for the seventeenth month in a row, according to the most recent data from the American Institute of Architects.
However, architectural firms remain generally optimistic that conditions will begin to improve once interest rates begin to fall, most likely in Septemberaccording to the ABI report.
