Total construction starts dropped 4 percent in January to a seasonally adjusted annual rate of $794.3 billion, according to Dodge Data & Analytics. Nonresidential building starts were flat in January, while nonbuilding starts dropped 10 percent and residential starts were 4 percent lower. From a regional perspective, starts were lower in three of the five regions―the Midwest, South Atlantic and South Central. Starts rose, however, in the Northeast and West.
Analyzing 12-month totals
With only one month of 2021 completed, a year-to-date analysis will provide little useful information, say analysts. Additionally, January 2020, which was prior to the pandemic, was the culmination of a strong cyclical upswing in construction starts that began in 2010 and thus provides a poor point of comparison. An alternative viewpoint for analysis is comparing 12-month totals. For the 12 months ending January 2021 total construction starts were 11 percent below the 12 months ending January 2020. Nonresidential starts were down 25 percent, while nonbuilding starts dropped 15 percent. Residential starts, however, were 5 percent higher for the 12 months ending January 2021. In January, the Dodge Index lost 4 percent to 168 (2000=100) from the 175 reading in December.
“The tenuous beginning to construction starts in 2021 highlights the long and rocky road ahead for the sector this year,” says Richard Branch, chief economist for Dodge Data & Analytics. “Over the course of the year the economy will recover as more Americans receive their vaccinations. However, the construction sector’s recovery will take time to materialize due to the deep scars caused to the industry by the pandemic. Patience will be key in the months to come.”
Nonresidential building starts unchanged, commercial shows slight increase
Nonresidential building starts were unchanged in January at a seasonally adjusted annual rate of $224.5 billion. Commercial starts were 1 percent higher during the month as a sizeable gain in warehouse construction offset declines elsewhere. Institutional building starts fell 9 percent in January, with education and healthcare construction down sharply.
The largest nonresidential building project to break ground in January was Nucor’s $850 million steel mill in Brandenburg, Kentucky. Also starting during the month were Nikola Motor’s $470 million hydrogen-electric truck plant in Eloy, Arizona, and the $327 million Riddle Hospital campus modernization in Media, Pennsylvannia.
For the 12 months ending January 2021, nonresidential building starts tumbled 25 percent relative to the 12 months ending January 2020. Commercial starts dropped 27 percent and institutional starts were 15 percent lower. Multifamily housing starts were 7 percent lower.
