Dodge Data: Construction starts end 2020 on sour note

Dodge Data & Analytics reports that total construction starts lost 5 percent in December, falling to a seasonally adjusted annual rate of $784.3 billion.

Nonresidential building starts fell 11 percent during the month, while nonbuilding starts were 5 percent lower. Residential starts were essentially flat over the month.

Starts were lower in three of Dodge Data’s four regions in December. The South Central was the only region to post an increase.

Full year 2020

For the full year, total construction starts fell 10 percent to $766.3 billion. Nonresidential building starts saw the steepest drop, losing 24 percent, while nonbuilding starts fell 14 percent. Residential construction starts ended 2020 up 4 percent thanks to strong single-family activity.

In December, the Dodge Index fell 5 percent to 166 from a 174 reading in November. For the full year, the Dodge Index averaged 163 – a 10 percent decline from 2019’s average.

“The roller coaster year of 2020 is over but not forgotten,” says Richard Branch, chief economist at Dodge Data. “The scars from the pandemic and recession will be long lasting and resulted in significant declines across most construction sectors.

“Single-family housing, warehouse, and highway and bridge starts were bright spots that cannot be understated for their gains,” Branch adds. “There will be difficult months ahead for the economy and for construction starts as COVID-19 cases mount. However, the continued rollout of vaccines means 2021 will be a better year.”

Nonbuilding

Nonbuilding construction fell 5 percent in December to a seasonally adjusted annual rate of $185.3 billion. Declines were broad based across the sector, with highways and bridges, environmental public works and miscellaneous nonbuilding starts all falling in December. The utility/gas plant category rose 70 percent in the month due to the start of two large power generation facilities.

The largest nonbuilding project to break ground in December was the $1.2 billion Traverse Wind Energy Center, a wind facility spread across Blaine, Custer and Kingfisher counties in Oklahoma. Also starting in December was the $1 billion Three Rivers Natural Gas Power Generating Energy Center in Morris, Illinois, and the $555 million West Lake Corridor Project, which is an eight-mile extension of the Northern Indiana Commuter District’s South Shore rail line in Dyer, Illinois.

For 2020, nonbuilding starts fell 14 percent from 2019 to $181.5 billion. Significant pullbacks in starts were seen in the utility/gas plant category as well as in miscellaneous nonbuilding. Environmental public works starts dropped 5 percent in 2020, while the highway and bridge category saw an 8 percent increase in starts.

Nonresidential

Nonresidential building moved 11 percent lower in December to a seasonally adjusted annual rate of $225.3 billion following a sizable increase in the previous month.

Commercial starts fell 23 percent over the month as office, hotel and warehouse starts all posted double-digit declines. Institutional starts fell 5 percent, while manufacturing starts rose 59 percent, thanks to the largest nonresidential building project to get started in December: the $600 million Gulf Coast Ammonia Plant in Texas City, Texas. Also starting in December were the $341 million Orlando Health Jewett Orthopedic Hospital in Orlando, Florida, and the $325 million University of Massachusetts Education & Research Building in Worcester, Massachusetts.

In 2020, nonresidential building starts lost 24 percent to $239.9 billion – the lowest level since 2015. Commercial starts tumbled 26 percent over the year, with warehouse construction eking out a 1 percent gain in 2020. Institutional starts fell 13 percent last year, while manufacturing starts dropped 59 percent.

Residential

Residential building starts fell by less than a percentage point in December to a seasonally adjusted annual rate of $373.7 billion. Multifamily starts posted a 24 percent increase for the month, while single family dropped 7 percent.

The largest multifamily structure to break ground in December was the $400 million second phase of the Veyoel Moshe Gardens residential building in Kiryas Joel, New York. Also starting were the $200 million 300M NE Street mixed-use building in Washington, D.C., and the $167 million AVA Arts District Live/Work Complex in Los Angeles.

For the full year, residential starts were 4 percent higher than in 2019 at $344.8 billion. Single-family starts were up 11 percent, while multifamily starts were 11 percent lower.