Total construction starts increased by 6% in February following a 27% decline in January, reports the Dodge Construction Network (DCN). Data shows residential and nonresidential building starts rose 11% and 9%, respectively.
Richard Branch, DCN’s chief economist, explains that while single-family units and manufacturing starts posted gains, slowdowns in commercial and institutional building starts could signify the beginning of a downturn.
“February construction starts were a mixed bag that led to marginal growth,” he says. “Single-family units posted a gain for the first time in 13 months, and manufacturing starts continued to be very robust, showing signs of promise early into 2023. However, the downturn in commercial and institutional building starts could be the beginning of an anticipated slow-down as the construction sector pulls back in the face of higher interest rates and lagging economic growth. While this ebbing should be comparatively mild, some construction verticals could face extreme stress as the year progresses.”
Year-to-Year Total Construction Starts
DCN reports that for the first two months of 2023, total construction starts were down 17% compared to 2022. On a year-over-year basis, residential starts decreased by 31%, and nonresidential starts dropped by 14%. For the 12 months ending February 2023, total construction starts were 9% higher than the 12 months ending February 2022. Nonresidential starts were 27% higher, while residential starts lost 9%.
Nonresidential Building Starts
The sector grew 9% in February to a seasonally adjusted annual rate of $368 billion. Driving the growth was a 218% gain in manufacturing starts due to the start of a large electronic vehicle (EV) battery plant in Ohio. Commercial starts decreased by 2% in February as office starts fell, offsetting increases in retail, hotels and warehouse activity. Institutional starts also fell during the month, following a decline in education and healthcare projects.
For the 12 months ending February 2023, total nonresidential building starts were 27% higher than the 12 months ending February 2022. Manufacturing starts were 91% higher, and institutional and commercial starts gained 18% on a 12-month rolling sum basis.
The largest nonresidential building projects to break ground in February were the $3.5 billion Honda EV battery plant in Jeffersonville, Ohio, the $1.4 billion expansion of Concourse D at Hartsfield Jackson Airport in Atlanta, and the $500 million Apex-1 Sustainable Lithium-Ion battery plant in Hopkinsville, Ky.
Residential Building Starts
Residential building starts rose 11% in February to a seasonally adjusted annual rate of $320 billion. Single-family and multifamily starts rose 4% and 22%, respectively. For the 12 months ending in February 2023, residential starts were 9% lower than the 12 months ending in February 2022. Single-family starts were 20% lower, while multifamily starts were up 18% on a rolling 12-month basis.
The largest multifamily structures to break ground in February were a $350 million mixed-use building in New York, the $215 million Four Season condominium in Washington, D.C., and the $140 million Palomar Heights mixed-use building in Escondido, Calif.