Dodge Data: Construction starts slip in June 2021

Total construction starts lost 7 percent in June, slipping to a seasonally adjusted annual rate of $863.6 billion, according to Dodge Data & Analytics.

All three major construction – residential, nonresidential building, and nonbuilding – pulled back during the month. Single-family housing starts are feeling the detrimental effects of rising materials prices, Dodge data says. Also, large projects that broke ground in May were absent in June for nonresidential building and nonbuilding starts, resulting in declines.

“Unabated materials price inflation has driven a significant deceleration in single-family construction,” says Richard Branch, chief economist at Dodge Data & Analytics. “Lumber futures have eased in recent weeks, but builders are unlikely to see much relief over the short term, meaning building costs will continue to negatively influence the housing industry.

“On the other hand, the nascent recovery in nonresidential buildings has continued on as projects pile up in the planning stages,” Branch adds. “These mixed signals coming from both residential and nonresidential construction starts suggest that recovery from the pandemic will remain uneven in coming months as rising materials prices and labor shortages weigh on the industry.”

Nonbuilding

Nonbuilding construction starts lost 13 percent in June, dipping to a seasonally adjusted annual rate of $171.8 billion.

While highway and bridge starts slid 7 percent, the overall decline in nonbuilding starts was the result of a 63 percent drop in the utility and gas plant category that followed a large increase in May.

Total nonbuilding starts, excluding the utility/gas plant category, rose 3 percent on gains in environmental public works and miscellaneous nonbuilding. Total nonbuilding starts were up 4 percent within the first six months of 2021. Environmental public works surged 35 percent, while utility/gas plants gained 13 percent. Miscellaneous nonbuilding (down 6 percent) and highway and bridge starts (down 9 percent), however, dragged on the sector.

For the 12 months ending June 2021, total nonbuilding starts were 6 percent lower than the 12 months ending June 2020. Environmental public works starts were 23 percent higher, while utility and gas plant starts were down 20 percent. Highway and bridge starts were down 3 percent, and miscellaneous nonbuilding starts were 22 percent lower through the first six months.

The largest nonbuilding projects to break ground in June were a $453 million sewer overflow project in Pawtucket, Rhode Island, the $439 million Bay Park Conveyance Project in Cedar Creek, New York, and the $390 million I-5 North Capacity Enhancement project in Los Angeles.

Nonresidential

Nonresidential building starts dropped 7 percent in June to a seasonally adjusted annual rate of $288 billion.

Large health care and manufacturing projects provided a significant boost to May, but the absence of similar projects in June led to normalized starts activity. Without the negative influence of these sectors, nonresidential starts would have increased 10 percent in June.

Commercial starts rose 12 percent with all categories posting gains, while institutional starts fell by 9 percent and manufacturing starts lost 62 percent over the month.

Through the first six months of 2021, nonresidential building starts were slightly ahead of the first six months of 2020. Commercial starts were up 7 percent and manufacturing starts were 36 percent higher, while institutional starts were 5 percent lower through the first six months.

For the 12 months ending this June, nonresidential building starts were 14 percent lower than the 12 months ending last June. Commercial starts were down 18 percent, while institutional starts fell 10 percent. Manufacturing starts dropped 42 percent in the 12 months ending this June.

The largest nonresidential building projects to break ground in June were the $1 billion Research & Development District office project in San Diego, the $470 million second phase of the Oyster Point Offices in San Francisco, and the $410 million Amazon distribution center in Rochester, New York.

Residential

Residential building starts fell 5 percent in June to a seasonally adjusted annual rate of $403.8 billion.

Single-family starts lost 8 percent, while multifamily starts were 2 percent higher. From January through June, total residential starts were 32 percent higher than the same period a year earlier. Single family starts were up 37 percent, while multifamily starts were 19 percent higher.

For the 12 months ending this June, total residential starts were 22 percent higher than the 12 months ending June 2020. Single-family starts gained 29 percent, while multifamily starts were up 5 percent on a 12-month sum basis.

The largest multifamily structures to break ground in June were the $400 million Courthouse Commons project in San Diego, the $267 million 1900 Crystal Ave residences in Arlington, Virginia, and the $250 million Five Park Condominiums & Apartments in Miami Beach, Florida.