Dodge: Construction starts increase in May

Total construction starts rose 8 percent in May to a seasonally adjusted annual rate of $1.11 trillion, according to Dodge Construction Network.

Nonresidential starts rebounded following the decline in April, improving 8 percent thanks to a sizable gain in manufacturing starts. During the month, nonbuilding starts improved 24 percent and residential lost 4 percent.

On a year-to-date basis through May, total construction starts were 6 percent below the first five months of 2022. Residential starts were down 25 percent in that time, nonresidential starts were 1 percent lower and nonbuilding starts gained 25 percent.

For the 12 months ending May 2023, total construction starts were 9 percent higher than the 12 months ending May 2022. Nonbuilding starts were 30 percent higher and nonresidential building starts gained 26 percent. In that time, however, residential starts declined 15 percent.

“May’s data is another sign that the construction sector is slowly splitting in two,” says Richard Branch, chief economist at Dodge Construction Network. “Public dollars are flooding into the manufacturing and infrastructure sectors, leading to significant growth over the last year.

“Meanwhile, the mostly private sectors of the building market like offices, multifamily and retail are struggling under the weight of higher interest rates, tightening lending standards and declining demand,” Branch adds. “The second half of the year is shaping up to be a challenging one. But the insulation provided by manufacturing and infrastructure starts will stabilize the industry and lead to modest overall growth.”

Nonbuilding

Nonbuilding construction starts rose 24 percent in May to a seasonally adjusted annual rate of $347 billion.

Utility/gas plants powered the increase as it jumped 53 percent over the month. Street and bridge starts moved 22 percent higher and environmental public works increased 3 percent. Meanwhile, miscellaneous nonbuilding starts showed no change.

Year-to-date through May, nonbuilding starts gained 25 percent compared to the first five months of last year. Utility/gas plants rose 76 percent and miscellaneous nonbuilding starts were up 27 percent. Highway and bridge starts gained 16 percent and environmental public works were up 11 percent on a year-to-date basis.

Related: Dodge Momentum Index down in May

For the 12 months ending May 2023, total nonbuilding starts were 30 percent higher than the 12 months ending May 2022. Utility/gas plant starts rose 68 percent and miscellaneous nonbuilding starts were 27 percent higher. Highway and bridge starts were up 22 percent and environmental public works rose 18 percent on a 12-month rolling sum basis.

The largest nonbuilding projects to break ground in May were the $5.3 billion first train for the Port Arthur LNG project in Port Arthur, Texas, the $1.5 billion Southeast Connector Interchange highway project in Fort Worth, Texas, and the $925 million Amtrak/Metro Norwalk Bridge Replacement project in Norwalk, Connecticut.

Nonresidential

Nonresidential building starts rose 8 percent in May to a seasonally adjusted annual rate of $412 billion.

The driving force behind the increase was manufacturing starts, which more than doubled in May. Commercial starts tumbled 20 percent in the month due to a sharp pullback in office and retail starts, while hotel starts moved higher. Institutional starts fell 1 percent in May as education starts declined, but healthcare increased.

On a year-to-date basis through May, total nonresidential starts were 1 percent lower than that of 2022. Institutional starts gained 12 percent, while manufacturing starts fell 11 percent and commercial starts dipped 7 percent.

For the 12 months ending May 2023, total nonresidential building starts were 26 percent higher than the 12 months ending May 2022. Manufacturing starts were 72 percent higher in that time, institutional starts increased 22 percent,] and commercial starts gained 12 percent.

The largest nonresidential building projects to break ground in May were the $1.9 billion Steel Dynamics aluminum plant in Columbus, Mississippi, the $1.9 billion Eli Lilly & Co. facility in Indianapolis and the $1.5 billion Ford Ohio EV plant in Sheffield, Ohio.

Residential

Residential building starts lost 4 percent in May to a seasonally adjusted annual rate of $356 billion.

Single family starts retreated, falling 2 percent in May following four consecutive monthly gains. Multifamily starts shed 8 percent.

On a year-to-date basis through May 2023, total residential starts were down 25 percent compared to a year earlier. Single family starts dropped 31 percent in that time and multifamily starts were down 12 percent.

For the 12 months ending in May 2023, residential starts were 15 percent lower than that of 2022. Single family starts were 26 percent lower while multifamily starts were up 9 percent on a rolling 12-month basis.

The largest multifamily structures to break ground in May were the $414 million North Cove mixed-use building in New York, the $190 million Albany Terrace and Irene McCoy Gains apartments in Chicago and the $190 million The Kaye Luxury apartment tower in Seattle.