Construction Starts Decline in February

Construction starts dropped 2% in February to a seasonally adjusted annual rate of $797.3 billion, according to Dodge Data & Analytics.

The Dodge Index fell 2% in February, to 169 (2000=100) from January’s 171. In February, starts fell in the South Central and West regions. However, they were higher in the Midwest, Northeast and South Atlantic Regions

In February, residential starts fell 7% to a seasonally adjusted annual rate of $388.9 billion. Both single-family and multifamily dropped 7%.

From February 2020 to February 2021, total residential starts were 4% higher than the 12 months ending February 2020. In the 12 months ending February 2021, single-family starts rose 12%, and multifamily starts fell 15% than the 12 months earlier.

In February, the most significant multifamily projects to break ground in February were Bronx Point’s $349 million mixed-use development in The Bronx NY, the $215 million Broadway Block mixed-use building in Long Beach Calif. and the $200 million GoBroome mixed-use building in New York NY, according to Dodge Data & Analytics.

Nonresidential building also fell 7% in February—hitting a seasonally adjusted annual rate of $208.1 billion, according to Dodge Data & Analytics. Healthcare starts picked up, but overall institutional starts dropped 8%. After a strong January, warehouse starts fell back and offset gains in office and hotel starts to pull down the overall commercial sector by 8%.

Nonresidential building starts dropped 28% for the 12 months ending February 2021 compared to the 12 months ending February 2020. Commercial starts dropped 30%, institutional starts fell 19%, and manufacturing starts declined 58% in the 12 months ending February 2021 compared to the 12 months before.

Ohio State University’s $1.2 billion Wexner Inpatient Hospital Tower in Columbus, Ohio, ApiJect Systems’ $785 million Gigafactory in Durham, NC, and Sterling EdgeCore’s $450 million data center in Sterling, Va., were the biggest nonresidential projects started in February

However, the news wasn’t all bad. Nonbuilding starts jumped 20% in February to a seasonally adjusted annual rate of $200.3 billion. The nonbuilding sector, which largely pipelines and site work, increased 76%. Environmental public works also posted gains, rising 26%. Highway and bridge starts rose 11% in February, while utility and gas plant starts decreased 17%.

Highway and bridge starts were 4% higher, environmental public works nudged up 1%, miscellaneous nonbuilding dropped 26% and utility/gas plant starts fell 37% for the 12 months ending February 2021 compared to the 12 months ending February 2020. As a whole, total nonbuilding starts dropped 13% compared to the 12 months ending February 2020.

Driving nonbuilding construction volume were the $2.1 billion Line 3 Replacement Program (a 337-mile pipeline in Minnesota), the $1.2 billion Red River Water Supply Project in North Dakota and the $950 million New England Clean Energy Connect Power Line in Maine.

“With spring just around the corner, hope is building for a strong economic recovery fueled by the growing number of vaccinated Americans,“ said Richard Branch, chief economist for Dodge Data & Analytics, said in a prepared statement. “But the construction sector will be hard-pressed to take advantage of this resurgence as rapidly escalating materials prices and a supply overhang across many building sectors weighs on starts through the first half of the year.”

A separate report from JLL said that virtually all costs associated with construction will increase in 2021. Labor costs should tick up between 2% and 5%, and materials costs and volatility remain elevated.

“The coming year will bring much more stability across nearly every measure of the construction industry,” the report notes. “However, after making it through a year where 93% of projects had to operate during stay-at-home orders, and over a quarter of projects navigated construction shutdown orders, almost anything would seem stable in comparison.”