Continuing an ongoing reversal of fortunes, single-family construction again slid downward in May, while nonresidential and nonbuilding maintained their modest post-COVID recovery. The single-family sector, which buoyed the industry for much of the pandemic, has seen an about face as the cost of construction -- particularly for lumber -- impacted demand. As in April, the sector pushed total construction starts downward slightly (-1%) to a seasonally adjusted annual rate of $902.8 billion.
Although lumber prices began to ease by mid-June, Richard Branch, chief economist, Dodge Data & Analytics, believes the challenges for residential construction will be ongoing, “The weight of higher material prices and a lack of skilled labor are having a direct and notable influence on residential construction activity," he stated. "These negative factors are expected to continue to impact the sector over the remainder of the year and will result in a less positive influence from housing on overall levels of construction activity."
While feeling similar effects, the nonresidential sector continued its upward climb from the pandemic-influenced depths encountered this time last year. "There are enough projects in the planning pipeline to suggest this trend should continue into next year," Branch noted, "but higher material prices will result in longer lead times to groundbreaking and more temperate improvements in nonresidential starts.”
Nonbuilding construction saw a 5% improvement in May to a seasonally adjusted annual rate of $199.2 billion. This was led by a 22% increase in the utility and gas plant category due to the start of a large transmission line. Highway and bridge starts rose 9% and environmental public works were up 8% higher. These gains were pulled downward by a 33% decline in the miscellaneous nonbuilding category.
Year-to-date through the first five months of 2021:
- total nonbuilding starts were 8% over 2020
- environmental public works was up 37%
- utility/gas plant and miscellaneous nonbuilding starts were up 25% and 11%, respectively
- highway and bridge starts fell 10%
For the 12 months ending May 2021, total nonbuilding starts were 5% lower vs. the same period in 2020. An 18% increase in environmental public works starts was offset by a 23% dip in utility and gas plant starts, while highway and bridge starts were largely even, showing less than a one percentage point decline. Miscellaneous nonbuilding starts fell 14% for the period.
The largest nonbuilding projects to break ground in May were:
- the $915 million Gateway South transmission project in Medicine Bow, WY,
- the $795 million improvements to the West Davis Highway in Farmington, UT,
- and a $528 million sewage reclamation project in Salt Lake City, UT.
Nonresidential building starts saw a healthy increase of 10% in May to a seasonally adjusted annual rate of $309.5 billion. Manufacturing, which struggled throughout the pandemic months, saw starts more than doubled in May as a large refinery broke ground, Dodge Data reports. Commercial starts rose 6%, with only the office category losing ground. Institutional starts fell 2% despite a large jump in healthcare projects.
Year-to-date, total nonresidential building starts are down 5% over the first five months of 2020. Institutional starts fell 9% and commercial starts were down 7%. Manufacturing starts were up 42% on a year-to-date basis, though rising from a very low trough compared to the same time frame last year.
For the 12 months ending May 2021, nonresidential building starts were 19% lower than the 12 months ending May 2020. Commercial starts were down 20%, and institutional starts fell 14%. Manufacturing starts plunged 43%.
The largest nonresidential building projects to break ground in May were:
- the $1.5 billion Diamond Green Diesel refinery in Port Arthur, TX,
- the $920 million Michigan Medicine Clinical Inpatient Tower in Ann Arbor, MI,
- and the $475 million University of California Living and Learning dorm project in San Diego, CA.
Residential building starts lost 10% in May, falling to a seasonally adjusted annual rate of $394.2 billion. The sector was driven downward by a 12% decline in single-family starts and a 7% shortfall in multifamily starts.
Despite the month-over-month decline, however, total residential starts remain 30% higher year-to-date compared to the same period last year, with single family up 37% and multifamily up 12%.
For the 12 months ending May 2021, total residential starts rose 18% compared to the same time frame in 2020. Single-family starts gained 27%, while multifamily starts dipped 2% on a 12-month sum basis.
Dodge Data reports the largest multifamily structures to break ground in May included:
- a $500 million mixed-use project in Brooklyn, NY,
- the $230 million Mather Senior Living Community in McLean, VA,
- and the $160 million Alcove Tower in Nashville TN.
Information provided by Dodge Data & Analytics and edited by Becky Schultz.