Total construction starts rose +8% in May to a seasonally adjusted annual rate of $1.11 trillion, according to Dodge Construction Network. Nonresidential starts rebounded following the decline in April, improving +8% thanks to a sizeable gain in manufacturing starts. During the month, nonbuilding starts improved by +24%, while residential lost -4%.
On a year-to-date basis through May, total construction starts were -6% below the first five months of 2022. Residential starts were down -25%, nonresidential starts were -1% lower, and nonbuilding starts gained +25%. For the 12 months ending May 2023, total construction starts were +9% higher than the 12 months ending May 2022. Nonbuilding starts were +30% higher, while nonresidential building starts gained +26%. However, on a 12-month rolling basis, residential starts posted a -15% decline.
“May’s data is another sign that the construction sector is slowly splitting in two,” said Richard Branch, chief economist for Dodge Construction Network. “Public dollars are flooding into the manufacturing and infrastructure sectors, leading to significant growth over the last year.
"Meanwhile, the mostly private sectors of the building market like offices, multi-family 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 a challenging one. But, the insulation provided by manufacturing and infrastructure starts will stabilize the industry and lead to modest overall growth.”
Nonresidential
Nonresidential building starts rose +8% in May to a seasonally adjusted annual rate of $412 billion. The driving force behind the increase was manufacturing starts, which more than doubled in May. Commercial starts tumbled -20% in May due to a sharp pullback in office and retail starts, while hotel starts moved higher. Institutional starts fell just -1% in May with education starts falling, but healthcare increasing. On a year-to-date basis through May, total nonresidential starts were -1% lower than that of 2022. Institutional starts gained +12%. Meanwhile, manufacturing starts were -11% lower and commercial starts were down -7%.
For the 12 months ending May 2023, total nonresidential building starts were +26% higher than the 12 months ending May 2022. Manufacturing starts were +72% higher, institutional starts improved +22%, and commercial starts gained +12%.
The largest nonresidential building projects to break ground in May were the $1.9-billion Steel Dynamics aluminum plant in Columbus, MS; the $1.9-billion Eli Lilly & Co. facility in Indianapolis, IN; and the $1.5-billion Ford Ohio EV plant in Sheffield, OH.
Residential
Residential building starts lost -4% in May to a seasonally adjusted annual rate of $356 billion. Single-family starts retreated, falling -2% in May following four consecutive monthly gains. Multi-family starts shed -8%. On a year-to-date basis through May 2023, total residential starts were down -25%. Single family starts were -31% lower, and multi-family starts were down -12%.
For the 12 months ending in May 2023, residential starts were -15% lower than that of 2022. Single family starts were -26% lower, while multi-family starts were up +9% on a rolling 12-month basis.
The largest multi-family structures to break ground in May were the $414-million North Cove mixed-use building in New York; the $190-million Albany Terrace and Irene McCoy Gains apartments in Chicago; and the $190-million The Kaye Luxury apartment tower in Seattle.
Nonbuilding
Nonbuilding construction starts rose +24% in May to a seasonally adjusted annual rate of $347 billion. Utility/gas plants powered the increase as it jumped +53% over the month. Street and bridge starts moved +22% higher, and environmental public works increased +3%. Meanwhile, miscellaneous nonbuilding starts showed no change. Year-to-date through May, nonbuilding starts gained +25%.
Utility/gas plants rose +76%, and miscellaneous nonbuilding starts were up +27%. Highway and bridge starts gained +16%, and environmental public works were up +11% on a year-to-date basis.
For the 12 months ending May 2023, total nonbuilding starts were 30% higher than the 12 months ending May 2022. Utility/gas plant starts rose +68%, and miscellaneous nonbuilding starts were +27% higher. Highway and bridge starts were up +22%, and environmental public works rose +18% on a 12-month rolling sum basis.
The largest nonbuilding projects to break ground in May were the $5.3 billion first train for the Port Arthur LNG project in Port Arthur, TX; the $1.5 billion Southeast Connector Interchange highway project in Fort Worth, TX; and the $925 million Amtrak/Metro Norwalk Bridge Replacement project in Norwalk, CT.