Total Construction Falls in May as Housing Stumbles

According to Dodge Data & Analytics, total construction starts dropped 1% in May to a seasonally adjusted annual rate of $902.8 billion. The decline was borne by residential starts, while nonresidential and nonbuilding started recovering from the COVID-19 pandemic.

“The weight of higher material prices and a lack of skilled labor are having a direct and notable influence on residential construction activity,” said Richard Branch, chief economist for Dodge Data & Analytics. “These negative factors are expected to continue to impact the sector over the remainder of the year and will result in a less positive influence from housing on overall levels of construction activity. While feeling similar effects, the nonresidential sector continues its modest recovery off the lows of last summer. There are enough projects in the planning pipeline to suggest this trend should continue into next year, but higher material prices will result in longer lead times to groundbreaking and more temperate improvements in nonresidential starts.”

Nonresidential building starts jumped 10% in May to a seasonally adjusted annual rate of $309.5 billion. Manufacturing starts more than doubled over the month as a large refinery broke ground. Commercial starts gained 6%, with only the office category losing ground. Institutional starts were down 2% in May, despite a large increase in healthcare projects. Year-to-date, total nonresidential building starts were down 5% compared to the first five months of 2020. Institutional starts were 9% lower, while commercial starts were down 7%. Manufacturing starts were up 42% on a year-to-date basis.

For the 12 months ending May 2021, nonresidential building starts were 19% lower than the 12 months ending May 2020. Commercial starts were down 20%, while institutional starts fell 14%. Manufacturing starts dropped 43% in the 12 months ending May 2021.

The largest nonresidential building projects to break ground in May were the $1.5 billion Diamond Green Diesel refinery in Port Arthur, Texas, the $920 million Michigan Medicine Clinical Inpatient Tower in Ann Arbor, Mich., and the $475 million University of California Living and Learning dorm project in San Diego.

Residential building starts lost 10% in May to a seasonally adjusted annual rate of $394.2 billion. Single-family starts were 12% lower, while multifamily starts dropped 7%. Year-to-date, total residential starts were 30% higher than the same period a year earlier. Single-family starts were up 37%, while multifamily starts were 12% higher.

For the 12 months ending May 2021, total residential starts were 18% higher than the 12 months ending May 2020. Single-family starts gained 27%, while multifamily starts were down 2% on a 12-month sum basis.

The largest multifamily structures to break ground in May were a $500 million mixed-use project in Brooklyn, N.Y., the $230 million Mather Senior Living Community in McLean, Va., and the $160 million Alcove Tower in Nashville, Tenn.

May’s starts rose in the Midwest, South Atlantic and West regions but fell in the Northeast and South Central regions.