Construction starts retreat in April 2020

The Dodge Momentum Index is at its lowest point since May 2014. Click to enlarge | Chart: Dodge Data & Analytics

Total construction starts dropped 25 percent from March to April to a seasonally-adjusted annual rate of $572.2 billion, according to Dodge Data & Analytics.

The decline is the result of the coronavirus pandemic and the economic recession that hit the construction sector.

In April, nonresidential building starts were down 37 percent from March while residential building fell 25 percent. Nonbuilding construction starts declined just 5 percent due to strong activity in bridges and streets, Dodge says.

On a year-to-date basis through the first four months of the year, total construction starts were 8 percent below the same period in 2019. However, residential starts were up 2 percent while nonresidential building starts fell 14 percent and nonbuilding starts dropped 15 percent.

In addition, the Dodge Momentum Index dropped to 121 in April, compared to 161 in March. This marks the lowest reading of the index since May 2014.

“The April starts data is definitely sobering, but also very much expected,” says Richard Branch, chief economist for Dodge Data & Analytics. “The near shuttering of the economy during April had a significant negative effect on the construction industry, leading to delays in both ongoing projects as well as those about to break ground.

“Even though parts of the country are beginning to reopen, and some areas that had paused construction are now restarting, it will be a very long road back to normalcy for the construction industry,” Branch adds. “Continued fear of a resurgence in the virus will lead to a continued reduction in economic activity over the coming months, affecting construction projects across the country. The economic and construction recoveries will remain slugging until a vaccine or viable treatment becomes available.”

Nonbuilding construction

Nonbuilding construction starts dropped 5 percent in April to a seasonally-adjusted annual rate of $156.6 billion. The utility/gas plant category plummeted 52 percent during the month, with much of that decline the result of very strong starts in March, according to Dodge. Environmental public works dropped 3 percent in April.

Highway and bridge starts, on the other hand, improved 26 percent and the miscellaneous nonbuilding category increased 9 percent.

The largest nonbuilding projects to break ground in April were the $673 million I-10 project in San Bernardino, California; the $410 million U.S. Route 101 project in Santa Barbara, California; and a $369 million road resurfacing project in Tallahassee, Florida.

Nonresidential building

Nonresidential building starts fell 37 percent from March to April to a seasonally-adjusted annual rate of $170.2 billion – the lowest monthly reading since early 2014. According to Dodge, April’s decline was much sharper than any single month-to-month drop seen during the Great Recession, and the severity of the decline was widespread.

Manufacturing starts dropped 56 percent, commercial starts retreated 47 percent and institutional construction starts fell 26 percent.

The largest nonresidential building project to start in April was the $950 million expansion of Portland International Airport. Also starting in April were the $253 million Wildcreek High School/Procter Hug High School in Sparks, Nevada, and the $140 million Waddell & Reed headquarters tower in Kansas City, Missouri.

Residential building

Residential building starts fell 25 percent lower in April to a seasonally-adjusted annual rate of $245.4 billion. Over the month, multifamily starts dropped 36 percent while single family starts lost 21 percent.

The largest multifamily structure to break ground during the month was the $217 million Hanover Square & Bayou apartments in Houston. Also starting during April were the $140 million Modera New Rochelle mixed-use project in New Rochelle, New York, and the $115 million Miami Urban Village apartments in Homestead, Florida.

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