Total construction starts lost 7 percent in June, slipping to a seasonally adjusted annual rate of $863.6 billion, according to Dodge Data & Analytics. All three major sectors―residential, nonresidential building, and nonbuilding―pulled back during the month. Single family housing starts are feeling the detrimental effects of rising materials prices. Large projects that broke ground in May were absent in June for nonresidential building and nonbuilding starts, resulting in declines.
“Unabated materials price inflation has driven a significant deceleration in single family construction,” says Richard Branch, chief economist for Dodge Data & Analytics. “Lumber futures have eased in recent weeks, but builders are unlikely to see much relief over the short-term, meaning building costs will continue to negatively influence the housing industry. On the other hand, the nascent recovery in nonresidential buildings has continued on as projects pile up in the planning stages. These mixed signals coming from both residential and nonresidential construction starts suggest that recovery from the pandemic will remain uneven in coming months as rising materials prices and labor shortages weigh on the industry.”
Nonresidential
Nonresidential building starts dropped 7 percent in June to a seasonally adjusted annual rate of $288.0 billion. Large health care and manufacturing projects provided a significant boost to May, but the absence of similar projects in June led to normalized starts activity. Without the negative influence of these sectors, nonresidential starts would have increased 10 percent in June. Commercial starts rose 12 percent with all categories posting gains, while institutional starts fell by 9 percent and manufacturing starts lost 62 percent over the month. Through the first six months of 2021, nonresidential building starts were slightly ahead of the first six months of 2020. Commercial starts were up 7 percent and manufacturing starts were 36 percent higher, while institutional starts were 5 percent lower through the first six months.
For the 12 months ending June 2021, nonresidential building starts were 14 percent lower than the 12 months ending June 2020. Commercial starts were down 18 percent, while institutional starts fell 10 percent. Manufacturing starts dropped 42 percent in the 12 months ending June 2021.
The largest nonresidential building projects to break ground in June were the $1.0 billion Research and Development District office project in San Diego, the $470-million second phase of the Oyster Point Offices in San Francisco, and the $410-million Amazon distribution center in Rochester, New York.
