Weaker commercial planning pulls nonresidential index downward

The Dodge Momentum Index (DMI), issued by Dodge Construction Network, fell 2 percent in May to 180.5 from a revised April reading of 184.1.

Over the month, the commercial component of the Dodge Momentum Index fell 6.1 percent while the institutional component improved 5.6 percent.

“The DMI dipped in May amid sustained weakness in commercial planning activity,” says Sarah Martin, associate director of forecasting at Dodge Construction Network. “Conversely, institutional planning steadily improved over the month as research and development laboratories and hospital projects steadily entered planning.

According to Martin, sustained elevation in the federal funds rate and tighter lending standards will likely constrain growth in the Dodge Momentum Index throughout the second half of 2023.

“However, the index remains above the historical average,” she says. “This paints an optimistic landscape for nonresidential construction in mid-2024, as the economy recovers and the Fed begins to pull back rates.”

More May detail

Continued weakness in office and hotel planning activity negatively impacted May commercial planning, Dodge says. Institutional planning accelerated alongside steady growth in education, health and amusement projects.

Year over year, the Dodge Momentum Index is 11 percent higher than it was in May 2022. The commercial and institutional components are up 7 percent and 18 percent, respectively, in that time.

According to Dodge, 30 projects valued at $100 million or more entered planning in May. The largest commercial projects were Buildings 3 and 4 of the Blue Sky Data Center project in Omaha, Nebraska – each valued at $466 million. The $400 million Prime Data Center building in Avondale, Arizona, also entered planning in May.

The $500 million Tennessee Performing Arts Center in Nashville, Tennessee, led the way on the institutional side, Dodge says. The $440 million Rady Children’s Hospital ICU/EMS Pavilion in San Diego also entered planning.

About the Dodge Momentum Index

The Dodge Momentum Index is a monthly measure of the initial report for nonresidential building projects in planning, which has shown to lead construction spending for nonresidential buildings by a full year.