Continued weakness in office and hotel planning contributed to a decline in May’s Dodge Momentum Index (DMI), reports the Dodge Construction Network (DCN). The association states that the DMI declined by 2% in May to 180.5 from a revised April reading of 184.1.

DCN data shows that the commercial component of the DMI fell by 6.1%, while the institutional component improved by 5.6%.

The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.

“The DMI dipped in May amid sustained weakness in commercial planning activity,” says Sarah Martin, associate director of forecasting for DCN. “Conversely, institutional planning steadily improved over the month as research and development laboratories and hospital projects steadily entered planning. Sustained elevation in the federal funds rate and tighter lending standards will likely constrain growth in the DMI over the second half of 2023; however, the index remains above the historical average. This paints an optimistic landscape for non-residential construction in mid-2024, as the economy recovers and the Fed begins to pull back rates.”

Commercial Planning Slows

A slowdown in office and hotel planning activity negatively impacted commercial planning in May. Institutional planning accelerated alongside steady growth in education, health and amusement projects. The DMI remains 11% higher yearly than in May 2022. The commercial and institutional components were up 7% and 18%, respectively.

A total of 30 projects valued at $100 million or more entered planning in May. The largest commercial projects included Buildings 3 and 4 of the Blue Sky Data Center project in Omaha, Neb., each valued at $466 million, and the $400 million Prime Data Center building in Avondale, Ariz. Leading the way on the institutional side was the $500 million Tennessee Performing Arts Center in Nashville, and the $440 million Rady Children’s Hospital ICU/EMS Pavilion in San Diego.

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