Construction starts plunge 8% as Fed toes line on rates


Dive Brief:

  • Total construction starts fell 8% in February to a seasonally adjusted annual rate of $1.07 trillion, according to data collected by Dodge Construction Network. It was the biggest monthly starts drop since November, when starts cratered 15%. 
  • Yet on a year-over-year basis, project kickoffs stayed in the black. For the 12 months ending February 2024, total construction starts were up 2% from the same time period ending February 2023, Dodge said. Despite that positive, the monthly numbers looked bleak.
  • “Construction activity was hit hard by higher rates and more restrictive credit standards,” said Richard Branch, chief economist at Dodge. “Starts struggled over the past several months as the lagged effect of higher rates impacted projects moving forward through the planning process.”

Dive Insight:

February’s starts could preface a prolonged period of sluggishness over the remainder of the year, Branch said, following January’s stagnant readings that were only kept positive by a manufacturing surge. 

Branch predicted that interest rate struggles would continue for some time, and said that some sectors wouldn’t move the needle on starts through the end of 2024.

Monthly Construction Starts

Value of projects breaking ground, in millions of dollars.

“While optimism should prevail in the second half of the year as the Federal Reserve begins to cut rates, some sectors like commercial, will make little headway over the remainder of the year,” Branch said in the release. The Federal Reserve kept interest rates unchanged for a fifth consecutive meeting Wednesday, though it also said it was still committed to cutting rates three times in 2024.

On a 12 month rolling sum basis, nonresidential building starts were down 2%, while residential starts were 4% lower and nonbuilding starts rose 19%.

Year-to-date Construction Starts

Value of projects breaking ground up to Feb., in millions of dollars.

In addition to the harsh interest rate environment, Branch pointed to a lack of available labor as a hindrance for the industry, particularly in the building of major factories amid the historic onshoring boom unfolding across the country. 

“The significant deficit of skilled labor led to further delays – especially in the manufacturing sector,” Branch said.

Nonbuilding dips

Nonbuilding construction starts fell 3% in February to a seasonally adjusted annual rate of $275 billion. Highway and bridge starts lost 17% in the month, while environmental public works dropped 8%, per the release.

However, some groups fared better. Utility and gas starts gained 13% and miscellaneous nonbuilding starts rose 48%.

On the year, the outlook is rosier. For the 12 months ending February 2024, total nonbuilding starts were 19% higher than a year earlier. Highway and bridge starts and environmental public works starts were up 12%. Utility and gas starts increased 37%, while miscellaneous nonbuilding starts rose 21%.

The largest nonbuilding projects to break ground in February were:

  • The $1.1 billion Bull Run Filtration Facility in Gresham, Oregon.
  • The $1.0 billion, 270-mile oil pipeline in North Slope County, Alaska.
  • The $500 million Scatter Wash Battery Energy Storage System in Phoenix.

Manufacturing, nonresidential sink

Nonresidential building starts fell 16% in February to a seasonally adjusted annual rate of $407 billion, Dodge said. Institutional starts were down 19% during the month, which Dodge blamed on a large decline in transportation and education buildings. Commercial starts, which include the beleaguered office sector, lost 3% due to a sizable pullback in warehouse starts, and even the juggernaut of manufacturing starts were off 28%.

For the 12 months ending February 2024, nonresidential building starts were 2% lower than the previous time period. Manufacturing starts were down 13% after hitting record levels in 2023 and commercial starts shrank 8%, while institutional starts were 9% higher for the 12 months ending February 2024.

The largest nonresidential building projects to break ground in February were:

  • The $1.8 billion Redwood Materials Battery Recycling Facility in Ridgeville, South Carolina. 
  • The $1.6 billion LG Chemical Battery Plant in Clarksville, Tennessee. 
  • The $1.2 billion Hollywood Burbank Airport replacement project in Los Angeles.

Residential tries to hang on

Residential building starts sank 2% in February, falling to a seasonally adjusted annual rate of $392 billion, per Dodge. Single family starts improved 5%, while multifamily starts lost 12%. 

The largest multifamily structures to break ground in February were:

  • The $500 million 400 Lake Shore Drive North Tower in Chicago, Illinois. 
  • The $400 million Alia at 888 Ala Moana building in Honolulu, Hawaii.
  • A $200 million mixed-use development in Gowanus, New York.



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