Total Construction Starts Decline in September

Total construction starts dipped 18 percent in September to a seasonally adjusted annual rate of $667.7 billion, essentially taking back August’s gain. While some of this decline is certainly payback from several large projects entering start in August, the drop in activity brought total construction starts below levels seen in June and July. Nonresidential starts fell 24 percent, while residential building dropped 21 percent over the month. Nonbuilding starts were 5 percent lower than August. 

Year-to-date through nine months, total construction starts were down 14 percent from the same period in 2019. Nonresidential starts were lower by 26 percent and nonbuilding was down 18 percent, while residential starts gained 1 percent. For the 12 months ending September 2020, total construction starts were down 8 percent from the 12 months ending September 2019. Nonresidential building starts were 19 percent lower and nonbuilding starts were 11 percent lower, while residential building starts rose 4 percent over the 12 months ending September 2020. In September, the Dodge Index fell 18 percent to 141 (2000=100) from the 173 reading in August. The Dodge Index in September was down 23 percent compared to a year earlier and 21 percent lower than its pre-pandemic level in February. 

“That construction starts took a significant step back in September is disappointing, but also not surprising,” states Richard Branch, chief economist for Dodge Data & Analytics. “The economic recovery has lost momentum and is showing strain since support provided to consumers and businesses from expanded unemployment insurance benefits and the Paycheck Protection Program have expired. The worsening budget crisis for state and local areas has also slowed growth in public project starts, particularly in the face of a somewhat uncertain outlook for federal infrastructure spending programs. The road to recovery will continue to be uneven and fraught with potholes until a vaccine is developed and widely adopted across the U.S.”

Nonbuilding construction fell 5 percent in September to a seasonally adjusted annual rate of $176.3 billion. Highway and bridge starts rose for the third consecutive month, jumping 10 percent, while utility/gas plant starts moved up 21 percent. However, environmental public works and miscellaneous nonbuilding starts each lost 26 percent over the month. 

The largest nonbuilding project to break ground in September was the $1.6 billion Guernsey Power Station in Pleasant City, Ohio. Also getting underway was the $727 million 1,122 MW Seminole Electric natural gas fired power plant in Palatka, Fla., and the $330 million Liquids Expansion and Solids Treatment Plant in Chino, Calif.

Through the first nine months of the year, total nonbuilding starts were down 18 percent. Starts in the highway and bridge category were up 2 percent, while environmental public works fell 10 percent, miscellaneous nonbuilding was down 33 percent, and the utility/gas plant category was 43 percent lower. On a 12-month rolling sum basis, total nonbuilding starts were down 11 percent compared to the 12 months ending September 2019. Starts in the street and bridge category were down 1 percent, while utility/gas plant starts were down 21 percent. Environmental public works starts dropped 6 percent in the 12 months ending September 2020 and starts in the miscellaneous nonbuilding category were 22 percent lower.

Nonresidential building starts were down sharply over the month of September, falling 24 percent to $177.4 billion. There was little good news in the detail: institutional starts fell 8 percent, manufacturing starts were 48 percent lower, and commercial starts dropped 36 percent. Only two building types posted a gain in September, retail and public buildings. 

The two largest nonresidential building projects to break ground in September were the $330 million second phase of the Iceberg Towers in Burbank, Calif., and the $330 million East Market Mixed-Use complex in Philadelphia. These projects were followed by the $296 million first phase of the Moffitt Cancer Center Hospital in Tampa, Fla. 

Year-to-date through nine months, total nonresidential building starts were down 26 percent. Commercial starts declined 27 percent, while institutional starts were 18 percent lower. Manufacturing starts dropped 56 percent compared to the first nine months of 2019. For the 12 months ending September 2020 total nonresidential building starts slid 19 percent. Institutional building starts were 16 percent lower, commercial starts down 19 percent and manufacturing starts plummeted 30 percent in the 12 months ending September 2020.

Residential building starts lost 21 percent in September, falling to a seasonally adjusted annual rate of $314.0 billion. Single family starts dropped 6 percent in the month as multifamily starts tumbled 54 percent.

The two largest multifamily structures to break ground in September were the $130 million AJ Railyards Mixed Use building in Sacramento, Calif., and the $130 million Sage Valley Apartments in West Valley City, Utah. The $125 million Avenir Mixed Use building in Jersey City was the next largest project to break ground.

Through the first nine months of 2020, residential construction starts were 1 percent higher than in the same period of 2019. Single family starts were up 6 percent, but multifamily starts were down 12 percent. For the 12 months ending in September, total residential starts were 4 percent higher compared to the 12 months ending September 2019. Single family starts were up 7 percent, while multifamily starts were down 5 percent.