U.S. construction starts fell 24.8% in August to a seasonally adjusted annual rate of $1.34 trillion, unwinding most of the megaproject surge that had lifted the measure to $1.79 trillion a month earlier, Dodge Construction Network reported Sept. 21.
The retreat was broad. Nonresidential building starts dropped 32.0% for the month, nonbuilding work β highways, bridges, utilities and environmental public works β fell 26.7%, and residential starts slipped 5.2%. Every region except the South Central recorded a decline, and two of them were severe: starts fell 52.6% in the Northeast and 51.4% in the West. The Midwest was nearly flat at -1.1%, the South Atlantic fell 24.2%, and the South Central rose 28.8%.
Month-to-month swings of that size have become routine in a market where a single groundbreaking can move the national number. Measured over longer windows, the picture is steadier. Year to date through August, total starts were up 15.2%, with nonresidential up 23.4% and nonbuilding up 22.2% β while residential was down 1.8%. For the 12 months ending in August, total starts were up 14.5% from the same period a year earlier, with nonresidential up 17.9%, nonbuilding up 27.6% and residential down 2.4%.
“After a pop in activity last month, construction starts largely normalized throughout August,” said Sarah Martin, director of economic research at Dodge Construction Network. “Abstracting from the month-to-month volatility, the story remains consistent. Data center, semiconductor and energy construction are driving growth, while several other sectors are facing subdued activity alongside deeper labor shortages, and accelerating material prices.”
Where the nonresidential drop came from
Nonresidential building starts fell to a $624 billion annual rate. Commercial starts led the decline, down 37.6%, with the office category β which is where Dodge counts data centers β off 31.3%. Warehouses fell 13.4% and parking garages 24.9%.
Two commercial sectors ran the other way. Hotel construction more than tripled, up 302.2% from a weak July, and retail store starts rose 26.9%.
Institutional starts pulled back 18.1%, dragged down by education starts (-14.3%) and a 39.1% drop in miscellaneous institutional work. Health care starts, also coming off a weak July, rose 96.1%. Manufacturing was the single largest swing factor, down 80.8% after the semiconductor and factory megaprojects that broke ground in July.
The year-to-date split inside nonresidential is stark: commercial and industrial construction is up 47.7% through August, while institutional starts are down 3.9%. Over the trailing 12 months, commercial starts are up 48.6% and institutional starts are down 4.3%.
The largest nonresidential projects to break ground in August were the $3.5 billion, 780-megawatt Amazon STACK Blanchard State Line Data Center in Mooringsport, Louisiana; the $3.2 billion Clarksville Hyperscale Data Center in Clarksville, Arkansas; and the $2.9 billion Bronx Detention Facility in the Mott Haven section of New York. On the nonbuilding side, the biggest starts were the $3.5 billion Steel River Energy Center in Wilson, Arkansas; the $1.4 billion Bluegrass Power Generation project in Jeffersonville, Ohio; and the $772 million, 600-megawatt Heritage Prairie Renewable Wind Farm in Dwight, Illinois.
Of the six largest projects on those two lists, two are data centers and three are power generation β the sectors Martin identified as carrying the market. It is the same concentration that showed up when July’s starts jumped 25.6% on $29 billion of data center and chip megaprojects.
Housing stays soft
Residential starts fell to a $364 billion annual rate. Within that, single-family was essentially unchanged, up 0.4%, while multifamily dropped 13.5%.
Year to date, residential starts are down 1.8%, with single-family off 4.6% and multifamily up 3.0%. The trailing-12-month comparison is sharper: single-family starts are down 8.6% from the prior 12 months, while multifamily is up 8.7%. By Dodge’s measure, in other words, apartment construction has been the steadier of the two over the past year even after August’s double-digit monthly drop.
The largest multifamily projects to break ground in August were the $1.1 billion 655 Madison Ave. mixed-use tower in New York; the $244 million Residences at The Nashville Edition, a hotel-and-condominium project in Nashville, Tennessee; and the $227 million 350 S. Fifth Avenue mixed-use and affordable housing development in Ann Arbor, Michigan.
What the numbers do and don’t say
Dodge measures the dollar value of projects that begin construction, so a handful of multibillion-dollar groundbreakings can dominate a month in either direction. On our reading, August’s decline is better understood as the absence of July’s megaprojects than as evidence that contractors stopped breaking ground.
The constraints Martin named β labor shortages and rising material prices β are showing up elsewhere in the industry’s own data. Contractors recently reported a backlog of 8.5 months of work, with one in six reporting data center projects β one measure of how far computing infrastructure has reached into the commercial construction pipeline.
