Total Construction Moves Higher in February

Total construction starts rose +6% in February to a seasonally adjusted annual rate of $912.8 billion, according to Dodge Construction Network. During the month, residential and nonresidential building starts rose +11% and +9% respectively, and nonbuilding starts declined by -5%.

For the first two months of 2023, total construction starts were -17% below that of 2022. On a year-over-year basis, residential starts were down -31%, nonresidential starts were off -14%, while nonbuilding starts gained +6%. For the 12 months ending February 2023, total construction starts were +9% higher than the 12 months ending February 2022. Nonresidential and nonbuilding starts were +27% and +19% higher respectively, while residential starts lost- 9%.

“February construction starts were a mixed bag that led to marginal growth,” said Richard Branch, chief economist for Dodge Construction Network, in the press release. “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 very well 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.”

Nonresidential Building

Starts gained +9% in February to a seasonally adjusted annual rate of $368 billion. Driving the gain was a +218% gain in manufacturing starts due to the start of a large EV battery plant in Ohio. Commercial starts decreased -2% in February as office and parking structure 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 both 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, OH; 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 rose +11% in February to a seasonally adjusted annual rate of $320 billion. Single-family and multi-family 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 multi-family starts were up +18% on a rolling 12 month basis.

The largest multi-family structures to break ground in February were a $350-million mixed-use building in New York; the $215-million Four Season condominium in Washington, DC; and the $140-million Palomar Heights mixed-use building in Escondido, CA.

Nonbuilding Construction

Starts fell -5% in February to a seasonally adjusted annual rate of $225 billion. This primarily results from a -30% decline in environmental public works starts and a -5% loss in highway and bridge starts. On the plus side, utility/gas plant starts rose +68% and miscellaneous public works starts were up +6%.  For the 12 months ending February 2023, total nonbuilding starts were +19% higher than the 12 months ending February 2022. Utility/gas plant starts rose +23%, and highway bridge starts increased +17%. Environmental public works and miscellaneous nonbuilding starts were up +19% and +18% respectively on a 12-month rolling sum basis. The largest nonbuilding projects to break ground in February were the $1.2-billion Trumbull Energy Center combined-cycle natural gas plant in Warren, OH; the $540-million Merit SI Gulfstar solar farm in Wharton County, TX; and the $530-million Mockingbird Solar Center in Brookston, TX.