Construction planning falls after brief rebound

Dive Brief:

  • The Dodge Momentum Index, a benchmark that measures nonresidential building planning, tumbled 8.6% in March as banking insecurity brought on by recent bank failures caused small banks to tighten lending standards, according to a Dodge Construction Network report. The index typically leads actual construction spending by 12 months.
  • The decline follows a short-lived rebound in February, where the DMI showed signs that an economic soft landing remained possible for the construction industry.
  • “Lending standards for small banks in particular have substantially tightened as banking insecurity intensifies,” said Sarah Martin, Dodge associate director of forecasting, in a press release. “As a result, owners and developers are more likely to pull back in the short term, which would further contract the DMI as we continue into the year.”

Dive Insight:

Several categories of commercial planning fell, led by a 29% and 11% decrease in the office and warehouse sectors, respectively. Overall commercial planning, which includes offices, retail, hotels and warehouses, dropped 6.6% in March.

Institutional planning weakened too, as healthcare and education planning dropped 17% and 6%, respectively. The overall institutional component decreased 12.9% in March.

The commercial and institutional planning decline in March follows the AIA’s Architecture Billings Index’s most recent report on softer business conditions in February. The ABI score has declined every month since October 2022, though its pace of decline remains relatively modest. 

Nevertheless, on a year-over-year basis, the commercial component remained up 37% in March, while the institutional component ticked up 2%, according to the Dodge report. The overall DMI was 24% higher than in March 2022.

Courtesy of Dodge Construction Network

 

A total of 18 projects with a value of $100 million or more entered planning in March. The leading commercial projects included:

  • $300 million office building in Chicago.
  • $215 million 58 Logistics Center Industrial Park warehouse project in Bakersfield, California.

The leading institutional projects included:

  • $425 million School of Public Health at UT Southwestern in Dallas.
  • $348 million rehabilitation hospital in Dallas.
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