New construction activity is continuing its upward trend, according to Dodge Construction Network. For the 12 months ending February 2022, total construction starts were up 16% above the same period in 2021, driven primarily by manufacturing. Nonresidential starts were 23% higher, while residential starts gained 19% and nonbuilding starts were up 1%.
“The manufacturing sector has been an important success story for construction since the pandemic began,” says Richard Branch, chief economist for Dodge Construction Network. “Domestic producers are expected to seek more control over their supply chains in the future, so that aspect of construction should continue to flourish.”
Mike Benford, AP’s regional business development director for the Gulf States Region, says the type of manufacturing facility has changed throughout the pandemic and will continue to do so over the next several years as more and more companies focus on nearshoring and nearsourcing.
“Large global, technology companies are investing in the U.S. and moving their facilities into locations such as Central Texas,” he notes. “They’re not only responding to the uncertainty in supply chain but also seeking access to capable, qualified talent and affordable living for employees.”
Benford points to Samsung’s new $17-billion advanced chip-making factory and Tesla’s new 4.3-million-square-foot Gigafactory, both located just outside Austin, as examples of nearshoring.
From January 2022 to February 2022, total construction starts rose 9% to a seasonally adjusted annual rate of $1.013 trillion, according to Dodge Construction Network. Nonresidential building starts swelled 32% due to the start of three large manufacturing facilities.
Without the manufacturing projects, total construction would have declined 6% in February as residential starts fell 3%, and nonbuilding starts fell by less than 1%. Branch says sectors other than manufacturing are struggling to gain traction in the face of high material prices and worker shortages. Additionally, the conflict in Ukraine will continue to put upward pressure on costs, making the construction industry’s recovery more tenuous in 2022.
“First quarter construction numbers are still pointing to lingering pandemic-related uncertainty in the office and hospitality sectors overall,” Benford says. “However, non-full-service hospitality is showing signs of life, and the build-to-suit office is making a return. Meanwhile, industrial and multifamily construction remains strong in certain markets.”
In February, manufacturing starts more than doubled to a seasonally adjusted annual rate of $385.6 billion. If not for these three projects, total nonresidential starts would’ve lost 15%, with commercial starts falling 8%, and institutional starts losing 22%.
The largest nonresidential building projects to break ground in February were:
Regionally, total construction starts in February rose in the Midwest, South Atlantic and West regions, but fell in the Northeast and South Central.
In Dallas-Fort Worth, where Benford is based, the construction market remains heavily focused on industrial and multifamily due to changing consumer habits, population density, influx of new residents, and ongoing supply chain disruptions. Farther south in Central Texas, there’s quite a bit of high-rise multifamily and industrial (including manufacturing) construction activity.
“Supply chain issues and labor shortages are slowing construction for most projects, regardless of location,” Benford concludes.