At the end of November, we were able to get a glimpse into where the construction market is headed, when the BLS (Bureau of Labor Statistics) announced total construction starts for October. The numbers tell a pretty interesting story, as always, and point to some larger trends that just may be on the horizon for 2024.
We see total construction starts nosedived 7% to a seasonally adjusted annual rate of $1.1 trillion. Nonbuilding and residential starts plummeted 32% and 1%, respectively. Interestingly, nonresidential building starts gained 8%. Dodge Construction Network suggests the reason construction starts have weakened in the last two months stem in part due to high interest rates and tight credit. The organization breaks these numbers down a little bit further. Perhaps it’s time we crunch the numbers a little bit further and take a stroll through each area.
Nonbuilding
The biggest drop is most apparent in nonbuilding, which had me curious about the real impact of infrastructure spending. A closer examination reveals highway and bridge starts did in fact improve 6% in October, but environmental starts fell to more than 15% and miscellaneous nonbuilding starts dropped a whopping 20%. We also saw a decline in utility and gas starts, which drove the category to a 12-month low. And all indications are not looking all that much brighter for the end of the year either.
Still, looking at the broader picture, total nonbuilding starts in October 2023 were in fact 22% higher than October 2022. So even though we are currently down, we are still above where we were a year ago.
The largest nonbuilding projects to break ground in October were the $319 million Newton-Weston bridge replacement in Newton, Mass., the $300 million Cadence Solar Center in York Township, Ohio, and the $280 million Estonian Solar project in Cooper, Texas.
Nonresidential
Turning our attention to nonresidential building starts, we see this did in fact increase in October, which was led by the groundbreaking of several very large manufacturing plants. If not for those plants, total commercial starts would have dripped some 28%.
I want to take a second here to say I am glad we have finally reached the point where companies are reshoring and nearshoring. This is something I urged needed to happen when I wrote my book Mending Manufacturing nearly 20 years ago—and it is something I continue to preach here on my blog as I look at all the manufacturing happening right here in my own state and across the nation. We are starting to see more investments in IoT and other automation on the plant floor.
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.V.
For the past 12 months ending in October 2023, total nonresidential building starts were 1% higher than that ending October 2022. Manufacturing starts were 2% higher, institutional starts improved by 5%, and commercial starts lost 4%. So, this segment is holding steady—for now.
Residential
Residential is on a slow downturn, as we see. Single family starts lost 2%, while multifamily starts were flat. For the 12 months ending in October 2023, residential starts were 15% lower than in 2022. Single family starts were 20% lower, while multifamily starts were down 7% on a rolling 12-month basis.
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, N.Y., and the $225 million first phase of the Baccarat Residences in Miami, Fla.
All in all, we see the market hasn’t crashed and burned, but it is slowly turning downward. This would be a good time for builders to prepare as we head into the New Year. And this means starting to look internally at technology. Now is the time to shore up processes with technology to create efficiencies. With all this in mind, how are you preparing for 2024? We will give you a greater opportunity to understand all of this as we spell out a few of the companies we have our eye on for 2024.
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