Total construction starts rebounded in May following a 4% decrease in April. Dodge Construction Network (DCN) reports that May’s total construction starts index increased 8% to a seasonally adjusted annual rate of $1.11 trillion. Nonresidential building starts increased by 8% due to a rise in manufacturing starts, while residential starts fell by 4% following a 12% increase in April.
Year-to-date, total construction starts throughout the first five months of 2023 were 6% below the same period in 2022. Residential starts were down 25% and nonresidential starts were 1% lower.
“May’s data is another sign that the construction sector is slowly splitting in two,” says Richard Branch, DCN’s chief economist. “Public dollars are flooding the manufacturing and infrastructure sectors, leading to significant growth over the last year. Meanwhile, the mostly private sectors of the building market, such as offices, multifamily and retail, are struggling under the weight of higher interest rates, tightening lending standards and declining demand. The second half of the year is shaping up to be challenging. But the insulation provided by manufacturing and infrastructure starts will stabilize the industry and lead to modest overall growth.”
Nonresidential Building Starts
The seasonally adjusted annual rate of nonresidential building starts increased by 8% to $412 billion in May. Manufacturing starts led the charge, more than doubling in May. Commercial starts slumped 20% due to a pullback in office and retail starts, while hotel starts increased.
The largest nonresidential building projects to break ground in May were the $1.9 billion Steel Dynamics aluminum plant in Columbus, Miss., the $1.9 billion Eli Lilly & Co. facility in Indianapolis, and the $1.5 billion Ford EV plant in Sheffield, Ohio.
Residential building starts fell 4% in May to a seasonally adjusted annual rate of $356 billion. Single-family starts declined by 2% following four consecutive monthly gains. Multifamily starts lost 8%. Year-to-date, total residential starts were down 25%, single-family starts were 31% lower, and multifamily starts were down 12%.
The largest multifamily structures to break ground in May were the $414 million North Cove mixed-use building in New York City, the $190 million Albany Terrace and Irene McCoy Gains apartments in Chicago, and the $190 million Kaye Luxury apartment tower in Seattle.