Dive Brief:

• Total construction starts tumbled 6% in September to a seasonally adjusted annual rate of $1.2 trillion, according to Dodge Construction Network, due to a widespread drop of activity particularly around megaprojects.
• The drop pushed overall year-to-date construction starts through September to trail last year’s pace by 3%, according to the report. The decline follows two consecutive months of gains, suggesting a return to the “up one month and down the next” trend that has lingered for much of 2023.
• “Risks continue to mount for the construction sector,” said Richard Branch, chief economist for Dodge Construction Network. “The industry needs further adjusting as rates are expected to stay higher for longer, along with the potential for higher energy costs and continued political uncertainty. A return to broad-based growth in construction starts is still some time away.”

Dive Insight:

While the construction starts report measures projects that have broken ground, the American Institute of Architects’ Architecture Billings Index tracks building design work for jobs to come. That index, which leads actual construction by nine to 12 months, posted its lowest score since December 2020.

That suggests decreasing business conditions, said Kermit Baker, AIA chief economist, in a release sent to Construction Dive.

“The September ABI score reflects a marked downturn in business conditions at architecture firms, with the sharpest decline observed since the peak of the pandemic,” said Baker. “While more firms are reporting a decrease in billings, the report also shows the hesitance among clients to commit to new projects.”

Manufacturing slides, sends nonresidential starts down

Nonresidential starts, which include commercial, institutional and manufacturing projects, dropped 4% in September to a seasonally adjusted annual rate of $459 billion. Manufacturing activity, which has propped up the nonresidential category this year, ticked down 13%, according to the Dodge report.

Meanwhile, institutional starts, which include education and healthcare projects, also fell 8% in September.

Nevertheless, strong activity around data center projects, which fall under the office sector in the Dodge database, as well as retail work, pushed overall commercial starts to jump 6% in September. 

On a year-to-date basis through September, total nonresidential starts remained 7% lower than at the same point in 2022, according to the report. 

The largest nonresidential projects to break ground in September included:

• The $2.5 billion Hyundai and SK EV battery plant in Cartersville, Georgia.
• The $1.1 billion prison in Elmore, Alabama.
• The $1 billion Microsoft data center in Mount Pleasant, Wisconsin.

Nonbuilding starts falls again

After a 14% drop in August, nonbuilding construction starts, which consists of highway, bridge, gas plant and environmental public projects, continued its slide in September, posting a 9% decline.

Highway and bridge starts dropped 15% in September, while environmental public works fell 29%, according to the report. On a positive note, utility and gas plant construction starts gained 14% in September.

Year-to-date, however, nonbuilding construction starts have shown resilience. The category remains up 25% compared to the same timeframe a year ago, led by a 58% jump in utility and gas plant construction and a 13% gain in highway and bridge starts.

The largest nonbuilding projects to break ground in September were:

• The $4.5 billion Sun Zia transmission line across 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.

Residential building weakens

Residential building starts followed up on its 1% decline in August with a further 6% drop in September. Single family starts gained 1%, but multifamily starts declined 17%, according to Dodge.

On a year-to-date basis through September, total residential starts dropped 17%. During that span, single family and multifamily starts dropped 19% and 12%, respectively.

The largest multifamily structures to break ground in September included:

• The $385 million first phase of the South Pier Residential Towers in Tempe, Arizona.
• The $275 million first phase of the Casa Bella Condominiums in Miami.
• The $260 million Chapel Block mixed-use development in Philadelphia.