Construction tracker finds slowdown indicators

The Massachusetts-based Dodge Construction Network reports that the Dodge Momentum Index (DMI) it calculates points to a looming lack of new projects in the United States, while its statistics for February indicate an 8 percent drop in new construction activity.

In late March, Dodge released construction activity figures for February that indicated total construction starts in the U.S. fell 8 percent in February compared with the prior month, with nonresidential building starts plunging by 16 percent.

Even in the government supported infrastructure-related nonbuilding sector, Dodge says project starts fell by 3 percent month-on-month in February while residential project starts fell by 2 percent.

“Construction activity was hit hard by higher rates and more restrictive credit standards,” says Richard Branch, chief economist for Dodge Construction Network.

“Starts struggled over the past several months as the lagged effect of higher rates impacted projects moving forward through the planning process. Additionally, the significant deficit of skilled labor led to further delays—especially in the manufacturing sector. While optimism should prevail in the second half of the year as the Federal Reserve begins to cut rates, some sectors like commercial will make little headway over the remainder of the year."

In the Dodge infrastructure or nonbuilding category, Dodge says highway and bridge starts fell by 17 percent in February compared with January. However, utility and natural gas project starts increased by 13 percent and “miscellaneous nonbuilding starts” rose by 48 percent.

Nonresidential starts fell by 16 percent in February in part because of what Dodge calls a large decline in transportation and education building starts. Manufacturing facility project starts also fell by 28 percent in February compared with the prior month.

Among the large nonresidential building projects that did break ground in February were the $1.8 billion Redwood Materials Battery Recycling Facility in Ridgeville, South Carolina; the $1.6 billion LG Chemical Battery Plant in Clarksville, Tennessee; and the $1.2 billion Hollywood Burbank Airport in Los Angeles.

If a rebound is to occur, it did not likely get its start in March, according to the DMI. That index is calculated by Dodge as a monthly measure of the value of nonresidential building projects known by the information services firm to be going into the planning stage.

The DMI fell 8.6 percent in March to 164.0 That is still an encouraging figure compared with the baseline 2000 index number of 100, but it falls from a February DMI of 179.5. “Over the month, commercial planning fell 3.2 percent and institutional planning dropped 17.2 percent,” Dodge says.

“In 2023, commercial planning decreased while institutional planning notably improved, sitting 29 percent above year-ago levels in February 2024,” says Sarah Martin, an associate director of forecasting for Dodge Construction Network.

“While strong market fundamentals should support institutional planning this year, this side of the index is more at risk for a substantive correction after last year’s growth.

“Much of the decline on the institutional side is credited to lower levels of education planning. Between February 2023 and February 2024, life science and R&D laboratory projects account[ed] for roughly 34 percent of education planning value. The surge of lab construction in recent years may lead to decreased planning demand as the market absorbs new supply in 2024.”

On the commercial side, slower growth in office and hotel planning pulled down that portion of the DMI, Dodge says.

Nonetheless in March, 14 projects valued at $100 million or more entered planning. Large commercial and institutional projects include the $277 million Trident Health Hospital in Johns Island, South Carolina; the $220 million Sunset Amphitheater in McKinney, Texas; a $215 million Microsoft Data Center in San Antonio, Texas; and the $158 million Melrod Data Center Building B in Fredericksburg, Virginia.