Construction Starts Rebound in October

Total construction starts rose 12% in October to a seasonally adjusted annual rate of $787.9 billon. While sizeable, the increase does not erase September’s substantial pullback in starts. All three major categories moved higher over the month, nonbuilding starts rose 25%, nonresidential buildings increased 19%, while residential activity gained 2%. Four of the five regions saw construction starts move higher in October, with the only decline coming in the South Central region.

Through the first ten months of 2020, total construction starts were 11% lower than the same period of 2019. Nonresidential starts were 24% lower and nonbuilding were down 14%. Residential starts, however, were 2% higher in the first ten months of this year. For the 12 months ending October 2020, total construction starts were down 6% compared to the previous 12 months. Nonresidential building starts were 17% lower and nonbuilding starts were 7% lower, while residential building starts rose 4% over the 12 months ending October 2020.

“October’s gain was welcome news following the large step back in starts during the previous month,” says Richard Branch, chief economist for Dodge Data & Analytics. “The month’s increase, however, does not mean all is well with the economy and construction sector. The economy lost traction as the stimulus provided by the CARES Act ended. With the next wave of COVID-19 infections looming, the economy will continue to lose steam until more fiscal stimulus is provided and a vaccine has been widely adopted. Until that has occurred, the construction sector will continue to be volatile.”

Nonresidential Starts

Nonresidential building starts recovered slightly from the sharp September decline, gaining 19% in October to a seasonally adjusted annual rate of $209 billion. Several large office and warehouse projects got underway during the month, pushing commercial starts up 23%. Manufacturing starts gained 26% during the month, while a large courthouse project helped institutional starts gain 15%.

The largest nonresidential building project to get started in October was the $585 million third phase of the Project Echo Facebook Data Center in Sandston, Va. Also getting started during the month was the $400 million Tesla Gigafactory in Austin, Texas and the $330 million Campus at Horton office project in San Diego.

Total nonresidential building starts were down 24% through the first ten months of 2020. Commercial starts were 27% lower and institutional starts were 16% lower, while manufacturing starts tumbled 54%. For the 12 months ending October 2020, total nonresidential building starts were down 17%. Institutional building starts fell 13%, commercial starts dropped 20%, and manufacturing starts declined 22% over the 12 months ending October 2020.

Residential Starts

Residential building starts moved 2% higher in October to a seasonally adjusted annual rate of $356.5 billion. The increase in the multifamily sector was robust, with starts rising 62% following a 52% loss the previous month. Single family starts fell 9% in October.

Through the first ten months of 2020, residential construction starts were 2% higher than in the same time period of 2019. Single family starts were up 8%, but multifamily starts were down 11%. For the 12 months ending in October, total residential starts were 4% higher than in the 12 months ending October 2019. Single family starts were up 8%, while multifamily starts were down 5%.

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