This story is part of a series of articles looking at the health of the construction industry in regions throughout the country. Click here to access the series.
Total construction starts in the South region increased 13% in 2021, similar to the national start growth of 14%, according to a Dodge Data & Analytics construction outlook webinar.
“Contrary to the outmigration we’re seeing in the Northeast and the Midwest, the South has seen net migration into the region over the past two years,” said Sarah Martin, senior economist at Dodge, during the webinar. “Construction activity has remained steady," she said, noting that residential activity was driving the momentum.
The largest nonresidential sectors in the South region, which consists of Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia, include warehouses and education facilities, according to Dodge data.
Warehouses
For 2022, Dodge forecasts warehouse starts in the South region to hit $21.51 billion, a 16% increase from a year ago.
But the warehouse sector is beginning to slow its acceleration. Amazon, one of the largest users of U.S. industrial space, recently announced a cutback on its e-commerce operations. Dodge Chief Economist Richard Branch said that decision will affect construction activity in the warehouse sector, particularly after 2022.
“We think the warehouse market grows this year but then once we get into 2023 and throughout our five year forecasts, the warehouse sector will start to pull back,” said Branch. “Not aggressively, but we will start to see a decline in warehouse construction moving forward.”
In the South region, the 16% warehouse increase forecasted this year is just half of 2021's pace, when warehouse starts jumped 31%. Even in 2019, the year before the pandemic, the warehouse sector grew 39% from its 2018 level, according to Dodge data.
Education
Dodge forecasts education starts in the South, the largest sector of the region, to reach $25.56 billion in 2022, a 18% increase from a year ago.
Martin said it’s likely K-12 construction and colleges will have more confidence to invest in their infrastructure this year as uncertainty over the pandemic recedes.
For example, in November the Fort Worth district in Texas approved a $1.2 billion bond to renovate all the district’s middle schools and build new elementary schools. There are similar measures being passed throughout the region, said Martin.
“Activity is forecast to pick up pretty strongly this year,” said Martin.
Manufacturing
Dodge forecasts South manufacturing starts to reach $12.82 billion in 2022, a 3% increase from a year ago. Across other regions in the U.S., starts in the sector are increasing due to a renewed push to bring back more manufacturing plants to the U.S.
For example, four of the 10 largest commercial projects over the last 12 months in the South region fall under the manufacturing umbrella. That includes the $1.5 billion U.S. Steel Flat-Rolled Mill at Big River in Osceola, Arkansas and the $1.3 billion Methanex Methanol Plant in Geismar, Louisiana.
Largest South starts over last 12 months
| Project | Type | Location | Start month | Value |
|---|---|---|---|---|
| Venture Global LNG Export Facility | Gas | Louisiana | October 2021 | $8.5 billion |
| U.S. Steel Flat-Rolled Mill at Big River | Manufacturing | Osceola, Arkansas | February 2022 | $1.5 billion |
| Methanex Methanol Plant #3 | Manufacturing | Geismar, Louisiana | October 2021 | $1.3 billion |
| 1 Southside Park Mixed-Use | Apartment | Miami | December 2021 | $710 million |
| Danimer Scientific’s Plant Expansion | Manufacturing | Bainbridge, Georgia | December 2021 | $700 million |
| Robley Rex VA Medical Center | Hospital | Louisville, Kentucky | November 2021 | $693 million |
| J.M. Smucker Uncrustables Facility | Manufacturing | McCalla, Alabama | January 2022 | $550 million |
| LA1 Asphalt Concrete Repair Ph II | Bridge | Golden Meadow, Louisiana | January 2022 | $464 million |
| RiverRenew Tunnel System Project | Sewage | Alexandria, Virginia | October 2021 | $454 million |
| Loews Hotel & Convention Center Ph II | Hotel | Arlington, Texas | October 2021 | $445 million |
SOURCE: Dodge Data & Analytics
But in the South region, that 3% percentage growth is a significant drop from last year, where manufacturing starts in the region jumped 38% from its 2020 level.
That’s largely due to materials prices and continued labor shortages in the region, said Martin. Additionally, high inflation is boosting the percentage growth of the sector. In real dollars, Martin said the sector is actually contracting.
“Labor shortages and supply chain volatility are likely to prevent substantial growth this year,” said Martin. “But when you take out that inflation measure, [percentage growth is] going to fall out to about negative 15%.”
South region leaders and laggards
Texas led the South region in 2021 with $114.13 billion in construction starts, a 7% increase from a year ago.
For the first four months of 2022, nonresidential activity in Dallas-Fort Worth jumped 27%. In Austin during the first four months of 2022, nonresidential activity jumped 37%.
Florida ranked second in the South region with $88.12 billion in construction starts, a 22% increase from a year ago.
For the first four months of 2022, nonresidential activity in the Miami area climbed 19%, while nonresidential activity in Tampa increased 58%.
West Virginia and Mississippi posted the largest drop in construction starts in the South region in 2021, falling 16% and 15% from 2020, respectively, according to Dodge.
2022 GDP growth expectations
Dodge expects four states in the South region to grow their GDP at a faster rate than the national average of 3.5% in 2022. Delaware leads the region with 5.8%, while Texas and Florida, the two largest construction start states, follow with 5.4% and 4.5% projected growth, respectively. Dodge projects Oklahoma to grow its GDP by 4.4%.
Mississippi and Kentucky round out the region with a projected GDP growth of 1.7% and 1.5%, respectively.
State GDP growth of South region
| State | 2017 | 2018 | 2019 | 2020 | 2021 | *2022 projection |
|---|---|---|---|---|---|---|
| Delaware | -3.5% | 1.5% | 4.1% | -3.4% | 3.7% | 5.8% |
| Texas | 2.7% | 3.9% | 3.2% | -2.9% | 5.6% | 5.4% |
| Florida | 3.6% | 3.3% | 3.0% | -2.8% | 6.9% | 4.5% |
| Oklahoma | 0.6% | 1.6% | 1.7% | -4.9% | 2.2% | 4.4% |
| Georgia | 3.6% | 2.7% | 3.5% | -3.9% | 5.8% | 3.2% |
| North Carolina | 2.8% | 1.5% | 2.1% | -2.9% | 6.7% | 3.2% |
| South Carolina | 2.3% | 2.6% | 2.3% | -1.9% | 5.9% | 3.1% |
| Louisiana | 2.3% | 1.1% | -0.1% | -5.8% | 2.4% | 2.8% |
| Tennessee | 2.7% | 1.3% | 2.0% | -3.9% | 8.6% | 2.8% |
| District of Columbia | 1.0% | 2.4% | 0.9% | -2.1% | 2.8% | 2.8% |
| Virginia | 1.5% | 2.4% | 2.0% | -2.8% | 4.0% | 2.7% |
| West Virginia | 2.1% | 2.3% | -0.8% | -3.9% | 4.0% | 2.6% |
| Maryland | 1.8% | 0.5% | 0.3% | -4.5% | 3.2% | 2.5% |
| Alabama | 1.7% | 1.6% | 1.3% | -3.2% | 4.1% | 2.3% |
| Mississippi | 0.4% | -0.5% | 0.4% | -1.8% | 4.4% | 1.7% |
| Kentucky | 1.0% | 1.2% | 1.7% | -3.0% | 4.7% | 1.5% |
SOURCE: Dodge Data & Analytics
