Weak office, hotel sectors continue to drag on construction planning | Dump Trucks Charlotte NC

Columbus Ohio Dump Truck Company Brief:

• The Dodge Momentum Index, a benchmark that measures nonresidential building planning, tumbled 2% in May due to slower commercial activity, according to a Dodge Construction Network report. The index, which peaked in December 2022 and typically leads actual construction spending by 12 months, fell for the third consecutive month and could signal further sluggishness in the second half of this year.
• Prolonged low levels of commercial construction predominantly stems from persistent weakness in the office and hotel sectors, which continues to drag down the overall index, according to the report. 
• “The DMI dipped in May amid sustained weakness in commercial planning activity,” said Sarah Martin, associate director of forecasting for Dodge Construction Network. “Sustained elevation in the federal funds rate and tighter lending standards will likely constrain growth in the DMI over the second half of 2023.”

Dump Trucks Columbus OH Insight:

After getting off to a rocky start in 2023, the commercial sector dropped another 6.1% in May. 

The Dodge report follows the American Institute of Architects’ Architecture Billings Index’s most recent report, which showed business conditions softened again in April. Excluding a slight rise in March, that now marks a decline in billings at architecture firms in every month since last October.

Meanwhile, concern about a variety of factors remains, including interest rates, financing and the lingering potential for a recession, according to the AIA. 

Despite the slower activity on the commercial side, the planning index remains positive over the past 12 months, according to Dodge. On a year-over-year basis, the commercial and institutional components remain up 7% and 18%, respectively, with the overall index up 11% for the year. 

Institutional activity, which includes healthcare and education projects, improved 5.6% in May.

“Institutional planning steadily improved over the month as research and development laboratories and hospital projects steadily entered planning,” Martin said, noting that the index remains above its historical average. “This paints an optimistic landscape for nonresidential construction in mid-2024, as the economy recovers and the Fed begins to pull back rates.”

A total of 30 projects with a value of $100 million or more entered the planning stages in May, according to Dodge. The leading commercial projects included:

• Two buildings for the Blue Sky data center project in Omaha, Nebraska, valued together at $932 million.
• San Francisco-based Prime Data Centers’ $400 million data center building in Avondale, Arizona.

The leading institutional projects included:

• The $500 million Tennessee Performing Arts Center in Nashville, Tennessee.
• The $440 million Rady Children’s hospital ICU/EMS Pavilion in San Diego, California.