Construction starts drop in June following May bump

By Kevin Yanik| July 21, 2023

Total construction starts fell 9 percent in June to a seasonally adjusted annual rate of $1 trillion, according to Dodge Construction Network.

Nonresidential starts led the downturn, falling 14 percent. Nonbuilding starts fell 9 percent, and residential starts lost 4 percent.

Through six months of 2023, total construction starts are 5 percent below where they were at the same juncture in 2022. While residential and nonresidential starts are down 24 percent and 2 percent in that time, respectively, nonbuilding starts gained 29 percent.

For the 12 months ending in June, total construction starts are still 9 percent higher than where they were at the same time last year. Nonbuilding starts are 34 percent higher, and nonresidential building starts are up 25 percent.

Still, on a 12-month rolling basis, residential starts posted a 17 percent decline overall.

“Construction starts are oscillating – up one month and down the next,” says Richard Branch, chief economist at Dodge Construction Network. “The presence, or absence, of mega projects is a key influencer in this trend.

“Nevertheless, high interest rates and tightening lending standards are leading to uncertainty among owners and developers, also creating hesitation among stakeholders, leading them to carefully assess whether projects will break ground,” he adds. “These conditions will persist through the remainder of the year, meaning little forward motion in construction starts.”

Nonbuilding

Nonbuilding construction slipped 9 percent in June to a seasonally adjusted annual rate of $317 billion.

Despite a strong showing in May, utility/gas plants fell 43 percent, and highway and bridge starts dropped 22 percent. Conversely, environmental public works starts gained 1 percent, and miscellaneous nonbuilding starts more than doubled due to the start of a large stadium project.

Through six months of 2023, nonbuilding starts are up 29 percent. Utility/gas plants rose 61 percent, and miscellaneous nonbuilding starts are up 60 percent. Highway and bridge starts also gained 19 percent, and environmental public works rose 14 percent.

The largest nonbuilding projects to break ground in June were the $2.6 billion Matterhorn Express Pipeline in Texas, the $1.4 billion Buffalo Bills stadium in Orchard Park, New York, and the $930 million Bissell & Lemay wastewater treatment plant in St. Louis, Missouri.

Nonresidential

Nonresidential building starts shrank 14 percent in June to a seasonally adjusted annual rate of $348 billion following an aggressive growth in manufacturing starts in May.

Commercial starts fell 6 percent, with gains in office and hotel offset by a pullback in warehousing and parking structures. Manufacturing starts, meanwhile, lost 67 percent. Institutional starts gained 15 percent in June due to health care and airport terminal work.

On a year-to-date basis through June, total nonresidential starts were 2 percent lower than that of 2022. Institutional starts gained 9 percent, while manufacturing and commercial starts fell 6 percent and 11 percent, respectively.

The largest nonresidential building projects to break ground in June were the $2.6 billion JetBlue Terminal 6 at John F. Kennedy International Airport in Jamaica, New York, the $625 million first phase of the GlobiTech semiconductor plant in Sherman, Texas, and a $558 million hospital tower at Strong Memorial Hospital in Rochester, New York.

Residential

Residential building starts fell 4 percent in June to a seasonally adjusted annual rate of $344 billion.

Single-family starts gained 8 percent while multifamily starts lost 23 percent.

On a year-to-date basis through June, total residential starts are down 24 percent. Single-family starts are 27 percent lower, and multifamily starts are down 17 percent.

The largest multifamily structures to break ground in June were the $500 million 1072 W Peachtree building in Atlanta, the $450 million Pendry-One Ashley condo tower in Tampa, Florida, and the $345 million Merchant Building in Columbus, Ohio.