Construction starts saw a welcome increase in March, reported Richard Branch, chief economist for Dodge Data & Analytics, gaining back the momentum lost in the previous month. Branch forecasts construction will continue to improve, but headwinds in the form of material prices could prove a drag on the construction recovery.
According to Dodge Data, total construction starts saw a gain of 2% for the month to a seasonally adjusted annual rate of $825.3 billion, largely fueled by growth in nonresidential building starts. This uptick was only partially offset by a much weaker increase in residential starts and declines in nonbuilding starts. The Dodge Index a monthly measure of the first (or initial) report for nonresidential building projects in planning, also rose 2% in March to 175 (2000=100) from February’s reading of 172.
For the first three months of 2021, total construction starts were down 4% on a year-over-year basis, dipping to $187.4 billion for the quarter compared to $194.3 billion for the same period in 2020. Nonresidential building's double-digit decline offset a sizable uptick in residential building and a more modest gain in nonbuilding construction.
Gains by Market Segment
According to a press release issued by Dodge Data:
Nonbuilding construction starts fell 7% in March to a seasonally adjusted annual rate of $186.7 billion, following a sizeable gain in February. Miscellaneous nonbuilding sector (-43%) and environmental public works (-11%) led the decline, whereas the utility gas plant and highway and bridge categories rose 39% and 2% respectively.
For the 12 months ending March 2021, total nonbuilding starts were 10% lower than the 12 months ending March 2020. Highway and bridge starts were 3% higher on a 12-month rolling sum basis, while environmental public works were up 8%. Miscellaneous nonbuilding fell 19% and utility/gas plant starts were down 36% for the 12 months ending March 2021.
Largest nonbuilding projects to break ground in March:
- $1.2 billion (1.1 GW) Sanborn Solar Facility in Mojave, CA
- $525 million Azure Sky (350 MW) wind farm in Throckmorton, TX
- $425 million Double E Pipeline, a 135-mile pipeline between Eddy County, NM and Waha, TX
Nonresidential building starts rose 13% in March to a seasonally adjusted annual rate of $235.3 billion. Institutional building starts rose 15% during the month fueled by gains in education, recreation, and public buildings. Commercial building starts increased 11% thanks to healthy gains across all commercial sectors. Manufacturing starts, meanwhile, lost 52% in March after strong levels during the previous two months.
For the 12 months ending March 2021, nonresidential building starts dropped 28% compared to the 12 months ending March 2020. Commercial starts declined 30%, institutional starts were down 20%, and manufacturing starts slid 56% in the 12 months ending March 2021.
Largest nonresidential building projects to break ground in March:
- $306 million Amazon, Inc. warehouse in Maspeth, NY
- $300 million Ball Corp. Aluminum Can factory in Pittson, PA
- $288 million TCCD Northwest Campus Redevelopment in Arlington, TX
Residential building starts increased by less than one percent in March to a seasonally adjusted annual rate of $403.3 billion. Multifamily starts rose by a brisk 33%, while single family starts slipped 9% lower.
For the 12 months ending March 2021, total residential starts were 6% higher than the 12 months ending March 2020. Single family starts gained 14%, while multifamily starts were down 14% on a 12-month sum basis.
Largest multifamily structures to break ground in March:
- $329 million 1629 Market Street mixed-use project in San Francisco, CA
- $287 million Schuylkill Yards West Tower in Philadelphia, PA
- $242 million National Urban League mixed-use building in New York, NY
Regionally, March’s starts rose in the West, South Central and Northeast regions, but fell in the Midwest and South Atlantic regions.
Material Supply, Prices a Stumbling Block
Just as the construction industry appears to be on the brink of moving toward recovery, a further stumbling block has emerged.
“The March increase in construction starts is certainly welcome news following the past three months of decline,” Branch commented. He adds that he expects construction to continue to improve as the year goes on.
“However, just as the pandemic is beginning to loosen its grip on the economy, logistical problems and the rapid escalation in material prices have stepped in as the primary risk to the construction sector,” he stated. “These issues may restrain opportunity in the coming months, causing the sector’s recovery to lag that of the overall economy.”
Information provided by Dodge Data & Analytics and edited by Becky Schultz.