Construction planning numbers end 2023 on a high note

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Dive Brief:

• The Dodge Momentum Index, a benchmark that measures nonresidential construction planning, closed out the year with a 3% jump in December, buoyed by data center growth, according to the Dodge Construction Network. Over the month, both commercial and institutional planning improved 1.0% and 6.1%, respectively. 
• The gain in December reversed the 1.4% drop in November, when a slowdown in commercial planning pushed the index down, according to Dodge. That indicates support for construction activity this year, said Sarah Martin, associate director of forecasting for Dodge Construction Network.
• “The DMI averaged a reading of 184.3 in 2023, hitting levels of activity that haven’t been recorded since 2008,” said Martin in the release. “While ongoing labor and construction cost issues will persist in 2024, a substantive amount of projects are sitting in the planning queue and will support construction spending going into 2025.”

Dive Insight:

Commercial planning, which includes office, hotel, retail and warehouse projects, has generally been in decline since its November 2022 peak due to high interest rates, supply chain disruptions and stricter lending standards, but Martin noted the segment began to stabilize to close the year.

For example, hotel and data center planning drove growth in the commercial segment of the DMI in December, while stronger healthcare and public building planning supported activity on the institutional side, said Martin. Still, year over year, it was 2% lower than in December 2022, according to Dodge.

That drop is largely due to commercial construction, which trailed its 2022 level by 9%. On the other hand, the institutional segment, which includes education, life sciences and healthcare projects, increased 14% over the same time period, according to Dodge.

Architectural billings remains down

Meanwhile, the Architectural Billings Index, a leading indicator for upcoming construction work that’s nine to 12 months out, remained below 50 for the fourth consecutive month. Any score below 50 indicates decreasing business conditions, according to the most recent data from the American Institute of Architects.

Nevertheless, the report has begun to identify encouraging signs in the pipeline, said Kermit Baker, AIA chief economist, in the release.

“Over the past three months this pace of decline has accelerated, with firms in all specializations and in all regions of the country reporting weakening business conditions,” said Baker. “However, with signs that credit conditions are beginning to ease, firms are reporting an uptick in inquiries for future projects.”

A total of 23 projects valued at $100 million or more entered planning in December, with six valued over $400 million, according to Dodge. The largest commercial projects included:

• The $500 million Universal Theme Park Kids Resort and Hotel in Frisco, Texas.
• The $400 million Dog River Industrial Park in Mobile, Alabama.

The largest institutional projects to enter planning included:

• Two Mayo Clinic buildings, each valued at $400 million, in Rochester, Minnesota.