New construction starts decline in October 2019

By |  November 18, 2019
Dodge October Construction Starts

Figures courtesy of Dodge Data & Analytics.

New construction starts decreased by 11 percent in October to a seasonally-adjusted annual rate of $696.3 billion, according to Dodge Data & Analytics, marking the third consecutive monthly decline in construction starts activity.

The October statistics lowered the Dodge Index to 147, compared to 166 in September.

Through the first 10 months of the year, total construction starts were 4 percent lower than the first 10 months of last year. Both residential and nonresidential construction starts decreased – 6 percent and 7 percent, respectively – through 10 months. On the plus side, however, nonbuilding construction starts were up 2 percent through the first 10 months of the year, compared to the same period in 2018.

“Concern over the health of the U.S. economy continues to play a key role in the pullback in starts over the past few months,” says Richard Branch, chief economist for Dodge Data & Analytics. “However, solid real estate fundamentals (such as vacancy rates) in addition to stable public funding will continue to support a modest level of construction activity across both public and private projects.”

From September to October, nonresidential building starts dropped 20 percent, nonbuilding starts declined 14 percent and residential starts retreated 2 percent.

Nonbuilding

Chart: Dodge Data & Analytics

Chart: Dodge Data & Analytics

Nonbuilding construction dropped 14 percent in October to a seasonally-adjusted rate of $159.2 billion. Electric utility/gas plant starts lowered by 69 percent in October while environmental public work starts fell 12 percent from September to October. Highway and bridge starts, however, improved 4 percent while miscellaneous nonbuilding starts climbed 14 percent.

The largest nonbuilding construction project to begin in October was the $2.1 billion first phase of the Red/Purple Line Modernization project in Chicago.

Through the first 10 months of the year, nonbuilding construction improved 2 percent compared to the same period last year. The electric utility/gas plant category improved 108 percent while environmental public works increased 2 percent, both compared to the same period in 2018. In addition, miscellaneous nonbuilding was down 21 percent while highways and bridges dropped 10 percent.

Nonresidential

Nonresidential building starts fell 20 percent from September to October to a seasonally-adjusted annual rate of $225.8 billion. According to Dodge, the decline comes after a strong September that saw two projects valued at nearly $1 billion break ground.

Commercial starts dropped 3 percent in October with gains in the office and hotel sectors helping ease the downturn. Manufacturing starts declined 69 percent while institutional starts fell 20 percent.

The largest nonresidential building project to break ground in October was the $600 million Vision Northland Medical Campus in Duluth, Minnesota, and a $200 million dry dock in Groton, Connecticut.

Through the first 10 months of the year, nonresidential building starts were 7 percent lower than the same period in 2018. Commercial starts improved 3 percent due to gains in office buildings, parking structures and warehouses, while institutional construction retreated 6 percent through October. In addition, manufacturing starts fell 43 percent.

Residential

Residential building retreated 2 percent in October to a seasonally-adjusted annual rate of $311.3 billion. Single-family housing starts declined 7 percent while multifamily starts improved 14 percent from September to October.

Through the first 10 months of the year, residential construction starts fell 6 percent, compared to the same period of 2018. Single-family housing starts declined 3 percent over the first 10 months of the year, while multifamily decreased 12 percent during the same period.

Zach Mentz

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