Construction Starts Continue to Erode in October

Construction starts weakened in October as high-interest rates and tightening credit continue to hamper businesses, states Richard Branch, chief economist for Dodge Construction Network (DCN). According to DCN data, October’s total construction starts fell 7% to a seasonally-adjusted annual rate of $1.1 trillion. Residential starts lost 1%, while nonresidential starts gained 8% in October.

The groundbreaking of several large manufacturing plants led the nonresidential building sector. If not for those plants, total commercial starts would have lost 28% in October. Photo courtesy of Wikimedia Commons.

For the 12 months ending October 2023, total construction starts were down 1%, and nonresidential building starts gained 1%.

“Construction starts have weakened over the last two months as high-interest rates and tight credit have restrained activity,” explains Branch. “While it seems likely that the Federal Reserve will hold off raising rates further, it will take time until they consider easing. This will likely result in a continued softening in construction starts over the next several months.”

Nonresidential

In October, the nonresidential building sector increased by 8% to a seasonally adjusted annual rate of $490 billion. The groundbreaking of several large manufacturing plants led the sector. If not for those plants, total commercial starts would have lost 28%. Commercial starts dropped 18% during the month due to a pullback in office activity, while institutional starts fell 15% despite a solid gain in healthcare starts.

Year-to-date, total nonresidential starts were 7% lower than that of 2022. Institutional starts gained 4%, while commercial and manufacturing starts fell 10% and 20%, respectively.

The largest nonresidential building projects to break ground in October were the $7.5 billion Micron semiconductor fabrication facility in Boise, Idaho, the $2.2 billion Hyundai/LG EV battery plant in Ellabell, Ga., and the $1.5 billion Nucor Sheet Mill in Apple Grove, W.Va.

Residential

Residential building starts fell 1% in October to a seasonally adjusted annual rate of $385 billion. Single-family starts lost 2%, while multifamily starts were flat. On a year-to-date basis through October 2023, total residential starts were down 15%. Single-family starts dropped 17%, and multifamily starts were down 12%.

The largest multifamily structures to break ground in October were the $364 million QPX mixed-use tower in Long Island City, N.Y., the $350 million mixed-use building on W37th Street in New York City, and the $225 million first phase of the Baccarat Residences in Miami.