Dodge Network: Total Construction Starts Rise in March

Total construction starts increased 19% in March to a seasonally adjusted annual rate of $1.09 trillion, according to Dodge Construction Network.

“Construction starts began the year with gusto," said Richard Branch, chief economist at Dodge Construction Network.

Nonresidential starts rose 33%, nonbuilding starts increased 17%, and residential starts moved 5% higher in March, he said.

Total construction starts in March also rose in all five regions.

Overall for Q1 of 2023, Branch said, total construction starts were 9% below that of 2022, having started with a 27% decline in January.

Year-to-date, the economist stated, residential starts were down 29%, and nonresidential and nonbuilding starts grew 6% and 12%, respectively. 

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In addition, for the 12 months ending March 2023, total construction starts were 11% higher than the 12 months ending March 2022. Nonresidential and nonbuilding starts were 33% and 21% higher, respectively, while residential starts lost 11%.

He noted that several large manufacturing projects are breaking ground, which pushes nonresidential construction higher, while a nascent recovery in single-family starts has been supporting residential growth. 

Branch believes the current growth will likely decline as the year progresses. He pointed out that construction starts activity has yet to see the impact of tightening financial conditions in the wake of the failure of Silicon Valley and Signature Banks.

“When we look at where we are so far, Q1 of 2023 had a lot of momentum to start the year,” Branch said. “I do expect that will erode as the year moves on because of slower economic growth and tightening economic conditions.”

Nonbuilding construction

The Dodge reports indicate that nonbuilding construction starts gained 17% in March to a seasonally adjusted annual rate of $263 billion. 

Miscellaneous nonbuilding was the only category to post a month-over-month loss. 

The report states that environmental public works rose 35%, utility/gas plants gained 16%, and highway and bridge starts were up 13%. 

Year-to-date across Q1, nonbuilding starts gained 12%, miscellaneous nonbuilding starts were up 43%, environmental public works rose 22%, utility/gas plants moved 8% higher, while highway and bridge starts gained 1%. 

For the 12 months ending in March 2023, total nonbuilding starts were 21% higher than the 12 months ending in March 2022. On the same 12-month rolling scale, all other nonbuilding start segments also were up. The report shows that utility/gas plant starts rose 32%, and highway bridge starts increased by 16%, environmental public works and miscellaneous nonbuilding starts were up 20% and 23%, respectively.

The largest nonbuilding projects to break ground in March were the $606 million I-35 Capital Express North Lanes in Austin, Texas, the $445 million Klamath River Renewal Project, in Oregon, which involves the removal of hydroelectric dams, and the $375 million 360 MW Atrisco Solar Farm in Rio Rancho, New Mexico.

Nonresidential building

According to the report, nonresidential building starts increased 33% in March to a seasonally adjusted annual rate of $492 billion. 

Manufacturing starts more than doubled over the month and once again was the driving force behind the gain as three very large projects got underway. Without these projects, total nonresidential starts would have only gained 3%. In addition, commercial starts rose 28%, with retail as the only category to fall, while institutional starts improved by 11% due to numerous healthcare projects getting underway. 

On a year-to-date analysis, the report indicates that total nonresidential starts were 6% higher, institutional starts gained 21%, manufacturing starts were 1% higher, and commercial starts were down 5%. 

Also, on the 12-month rolling scale, total nonresidential building starts were 33% higher manufacturing starts were 122% higher, institutional starts improved 22%, and commercial starts gained 18%.

The largest nonresidential building projects to break ground in March were the $5.5 billion Hyundai EV plant in Ellabell, Georgia, the $3.0 billion Panasonic Energy North America Battery Manufacturing Plant, and the $780 million third phase of the BASF MDI chemical plant in Geismar, Louisiana. 

Residential building

Although there is an overall decline in residential construction, March saw a 5% increase including a 4% increase in single-family starts and an 8% rise in multifamily.

On a year-to-date basis through three months of 2023, total residential starts were down 29%; single-family starts were 37% lower, while multifamily starts were down 12%.

The report states that for the 12 months ending in March 2023, residential starts were 11% lower than the 12 months ending in March 2022. Single-family starts were 23% lower, while multifamily starts were up 16% on a rolling 12-month basis. 

The largest multifamily structures to break ground in March were a $400 million mixed-use project in Jamaica, New York, the $225 million Chestnut Commons Affordable Housing project in Cypress Hills, New York, and the $268 million Knox mixed-use development in Dallas, Texas.

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