Dive Brief:
- Total construction starts tumbled 18% in November to a seasonally adjusted annual rate of $926.3 billion after a brief uptick in October, according to a Dodge Construction Network report.
- Nonresidential building and nonbuilding starts fell 25% and 21% respectively in November from the previous month, while residential starts dropped 5%, according to the report. Year to date, total construction starts remained 14% higher compared to the same period in 2021. Nonresidential building and nonbuilding starts jumped 36% and 16% year over year, while residential starts decreased 1%.
- “Month-to-month volatility in construction activity continues to reign supreme as uncertainty mounts over the economy in 2023,” said Richard Branch, chief economist for Dodge Construction Network. “Higher interest rates and fear of recession are first and foremost on the mind of most builders and developers, and potentially restrained starts activity.”
Dive Insight:
Branch maintains a slowdown is to be expected, especially as the Federal Reserve continues to hike up interest rates. Still, he added the damage should be isolated to a few verticals and not as widespread as what the industry experienced during the period of 2007-2009.
“As some material prices head lower and more public dollars come into the market for infrastructure and manufacturing projects, the year is ending with a fair bit of momentum,” said Branch. “Next year will be a challenge, but nothing like what the sector faced during the Great Recession.”
Highway and bridge starts fell 32% in November, while utility and gas plant starts ticked up 3%.
But both those categories should be shielded from any economic downturn in 2023, particularly because of public funding from the Infrastructure Investment and Jobs Act, said Branch.
The largest nonbuilding projects, which include roads, water infrastructure and power plants, to break ground in November include:
- $678 million 577MW Fox Squirrel solar farm in Madison County, Ohio.
- $522 million coastal resilience project near the Brooklyn Bridge in Brooklyn, New York.
- $465 million 300MW White Rock wind project in Anadarko, Oklahoma.
Commercial starts fell 33% in November, while institutional starts dropped 12%. But while economists expect certain categories in nonresidential to stall in 2023, Branch said to expect solid performance from data center, manufacturing and healthcare projects next year.
In fact, those types of projects are already showing positive activity. Here are the largest nonresidential projects, which include stores, offices, data centers, warehouses, hotels, education and healthcare, to break ground in November, according to Dodge:
- $1.1 billion Harbor-UCLA Medical Center in Torrance, California.
- $800 million Project Velvet Meta data center in Kansas City, Missouri.
- $500 million Eli Lilly manufacturing campus in Concord, North Carolina.
Regionally, total construction starts in November fell in all five regions, according to the report.
