Tightening lending standards contributed to declining nonresidential building projects in planning for March, reports Dodge Construction Network (DCN). The organization’s Dodge Momentum Index (DMI) fell 8.6% in March to 183.7 from February’s reading of 201.0. DCN data shows the DMI’s commercial component fell by 6.6%, and the institutional component decreased by 12.9%.
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.
“We are predicting the DMI to work its way back to historical norms throughout 2023, concurrent with weaker economic conditions,” says Sarah Martin, associate director of forecasting for DCN. “Lending standards for small banks, particularly, have substantially tightened as banking insecurity intensifies. As a result, owners and developers are more likely to pull back in the short-term, which would further contract the DMI as we continue into the year.”
Nonresidential Building Planning Declines
In March, commercial planning was hampered by fewer projects in the office and warehouse sectors, which declined by 29% and 11%, respectively. Meanwhile, institutional planning experienced a more significant decline, with healthcare falling by 17%, education dipping by 6%, and amusement planning dropping by 14%. However, the steady influx of research and development laboratories supported the weakening sector. In March 2023, the DMI remained 24% higher than in March 2022. Year-to-year, the commercial component was up 37%, and the institutional component was 2% higher.
During the month, a total of 18 projects with a value of $100 million or more entered the planning phase. Among the leading commercial projects were a $300 million office building in Chicago and the $215 million 58 Logistics Center Industrial Park warehouse project in Bakersfield, Calif. Two projects at UT Southwestern in Dallas led the way in the institutional sector: a $425 million School of Public Health and Health Professions building and a $348 million rehabilitation hospital.