Construction Starts Step Back in September

October 19th, 2020 | Category: Industry News

Total construction starts dipped 18% 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%, while residential building dropped 21% over the month. Nonbuilding starts were 5% lower than August.

Year-to-date through nine months, total construction starts were down 14% from the same period in 2019. Nonresidential starts were lower by 26% and nonbuilding was down 18%, while residential starts gained 1%. For the 12 months ending September 2020, total construction starts were down 8% from the 12 months ending September 2019. Nonresidential building starts were 19% lower and nonbuilding starts were 11% lower, while residential building starts rose 4% over the 12 months ending September 2020.

“That construction starts took a significant step back in September is disappointing, but also not surprising,” says 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.”

Nonresidential building starts were down sharply over the month of September, falling 24% to $177.4 billion. There was little good news in the detail: institutional starts fell 8%, manufacturing starts were 48% lower and commercial starts dropped 36%. 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%. Commercial starts declined 27%, while institutional starts were 18% lower. Manufacturing starts dropped a painful 56% compared to the first nine months of 2019. For the 12 months ending September 2020, total nonresidential building starts slid 19%. Institutional building starts were 16% lower, commercial starts down 19% and manufacturing starts plummeted 30% in the 12 months ending September 2020.

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