Construction Starts End 2020 on Sour Note

Total construction starts lost 5% in December, falling to a seasonally adjusted annual rate of $784.3 billion. Nonresidential building starts fell 11% during the month, while nonbuilding starts were 5% lower. Residential starts were essentially flat over the month. Starts were lower in three of the four regions in December; the South Central was the only region to post an increase.

For the full year, total construction starts fell 10% to $766.3 billion. Nonresidential building starts saw the steepest drop, losing 24%, while nonbuilding starts fell 14%. Residential construction starts ended 2020 up 4% thanks to strong single-family activity. In December, the Dodge Index fell 5% to 166 (2000=100) from the 174 reading in November. For the full year, the Dodge Index averaged 163, a 10% decline from 2019’s average.

“The roller coaster year of 2020 is over, but not forgotten,” stated Richard Branch, chief economist for Dodge Data & Analytics. “The scars from the pandemic and recession will be long lasting and resulted in significant declines across most construction sectors. Single-family housing, warehouse and highway and bridge starts were bright spots that cannot be understated for their gains. There will be difficult months ahead for the economy and for construction starts as COVID-19 cases mount. However, the continued roll out of vaccines means 2021 will be a better year.”

Nonresidential building moved 11% lower in December to a seasonally adjusted annual rate of $225.3 billion following a sizeable increase in the previous month. Commercial starts fell 23% over the month as office, hotel, and warehouse starts all posted double-digit declines. Institutional starts fell 5%, while manufacturing starts rose 59%, thanks to the largest nonresidential building project to get started in December, the $600-million Gulf Coast Ammonia Plant in Texas City, Texas. Also starting in December were the $341-million Orlando Health Jewett Orthopedic Hospital in Orlando, Florida and the $325-million University of Massachusetts Education and Research Building in Worcester, Massachusetts.

In 2020, nonresidential building starts lost 24% to $239.9 billion — the lowest level since 2015. Commercial starts tumbled 26% over the year, with warehouse construction eking out a 1% gain in 2020. Institutional starts fell 13% last year, while manufacturing start dropped 59%.