McGraw Hill Construction

Slip in October Dodge Momentum Index Shows Developer Caution

The Dodge Momentum Index slipped 0.9 percent in October compared to the previous month, according to McGraw Hill Construction, a division of McGraw Hill Financial. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. October’s decline brought the Momentum Index to 115.3 (2000=100), down from September’s 116.4, although still well above the reading of 90.8 registered at the end of last year. The latest month’s retreat may be just a brief departure from the broader trend, in this case the steady improvement shown by the Momentum Index from December 2012 through this September. At the same time, it may well be a sign of renewed caution on the part of developers, given the uncertainty about the political and economic environment stemming from the October government shutdown and the debt ceiling deliberations.

The October Momentum Index once again revealed divergent paths for its main parts – new plans for commercial buildings, the more cyclically sensitive of the two components, dropped 2.1 percent while institutional building plans held steady. On the commercial side, a large decline in plans for new offices and stores outweighed strong gains for new hotel development. New lodging projects entering the pipeline in October included the $50 million Dream boutique hotel in Dallas and a 250-room extended stay hotel in Florham Park, N.J. The stability in institutional plans, meanwhile, was aided by a strong upturn for new healthcare projects, including $118 million for Hurricane Sandy repairs to the Bellevue Medical Center in New York and the $91 million Landmark Farm Colony Senior Housing Community in Staten Island, N.Y.

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