Higher interest rates have failed to put a damper on the number of construction starts, says Richard Branch, the chief economist for Dodge Construction Network (DCN). The organization reports that total construction starts rose 8% in October to a seasonally adjusted annual rate of $1.12 trillion. In October, nonresidential building starts gained 9% while residential starts fell by 3%.
Year-to-date, total construction starts were 16% higher in the first ten months of 2022 compared to the same period of 2021. Nonresidential building starts rose 37% over the year and residential starts remained flat.
“October’s gain in construction starts is a further sign that the construction sector continues to weather the storm of higher interest rates,” says Branch. “While the residential sector is feeling the pain, the nonresidential building and infrastructure sectors are hitting their stride. Some weakness is to be expected as the Federal Reserve continues its battle with inflation; however, the damage should be isolated to a few verticals and not as widespread as what the industry witnessed during the Great Recession.”
Nonresidential building starts rose 9% in October to a seasonally adjusted annual rate of $480.5 billion, reports the DCN. During the month, commercial starts rose 19%, led by office and hotel projects. Institutional starts rose by 8% due to a surge in education projects, while manufacturing starts fell by 5%. Through the first ten months of 2022, nonresidential building starts were 37% higher than the first ten months of 2021. Commercial starts grew 23%, and institutional starts rose 21%. Manufacturing starts were 157% higher on a year-to-date basis.
The largest nonresidential building projects to break ground in October were the $3.2 billion Texas Industries chip fabrication plant (building 1) in Sherman, Texas, the $2 billion General Motors Orion EV plant in Orion Township, Mich., and the $1 billion Gevo Net-Zero 1 hydrocarbon plant in Lake Preston, S.D.
Residential building starts fell 3% in October to a seasonally adjusted annual rate of $366.4 billion. Single-family starts lost 3%, while multifamily starts dropped 4%. Through the first ten months of 2022, residential starts were flat when compared to the same time in 2021. Multifamily starts were up 26%, while single-family housing slipped 10%.
The largest multifamily structures to break ground in October were the $564 million Long Island City Center II in Long Island City, the $450 million Waldorf Astoria residences and hotel in Miami, and the $167 million Modera McGavock mixed-use building in Nashville.