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March Sees Increase in Construction Starts, But Rising Material Prices Threaten Recovery

Total construction starts rose 2 percent in March to a seasonally adjusted annual rate of $825.3 billion, according to Dodge Data & Analytics. A solid gain in nonresidential building starts fueled the March gain. The Dodge Index rose 2 percent in March, to 175, 2000=100, from February’s 172. Regionally, March’s starts rose in the West, South Central, and Northeast regions, but fell in the Midwest and South Atlantic regions.

“The March increase in construction starts is certainly welcome news following the past three months of decline,” says Richard Branch, chief economist for Dodge Data & Analytics. “Construction will continue to improve as the year moves on. However, just as the pandemic is beginning to loosen its grip on the economy, logistical problems and the rapid escalation in material prices have stepped in as the primary risk to the construction sector. These issues may restrain opportunity in the coming months, causing the sector’s recovery to lag that of the overall economy.”

Nonresidential building

Nonresidential building starts rose 13 percent in March to a seasonally adjusted annual rate of $235.3 billion. Institutional building starts rose 15 percent during the month fueled by gains in education, recreation and public buildings. Commercial building starts increased 11 percent thanks to healthy gains across all commercial sectors. Manufacturing starts, meanwhile, lost 52 percent in March after strong levels during the previous two months.

For the 12 months ending March 2021, nonresidential building starts dropped 28 percent compared to the 12 months ending March 2020. Commercial starts declined 30 percent, institutional starts were down 20 percent, and manufacturing starts slid 56 percent in the 12 months ending March 2021.

The largest nonresidential building projects to break ground in March were a $306-million Amazon Inc. warehouse in Maspeth, New York, the $300-million Ball Corp. Aluminum Can factory in Pittson, Pennsylvania, and the $288-million TCCD Northwest Campus Redevelopment in Arlington, Texas.