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Decline in Residential Drops Construction Starts in May

Total construction starts dropped 1 percent in May to a seasonally adjusted annual rate of $902.8 billion, according to Dodge Data & Analytics. The brunt of the decline was borne by residential starts, while nonresidential and nonbuilding starts continued their recovery from the COVID-19 pandemic.

“The weight of higher material prices and a lack of skilled labor are having a direct and notable influence on residential construction activity,” said Richard Branch, chief economist for Dodge Data & Analytics. “These negative factors are expected to continue to impact the sector over the remainder of the year and will result in a less positive influence from housing on overall levels of construction activity. While feeling similar effects, the nonresidential sector continues its modest recovery off the lows of last summer. There are enough projects in the planning pipeline to suggest this trend should continue into next year, but higher material prices will result in longer lead times to groundbreaking and more temperate improvements in nonresidential starts.”


Nonresidential building starts jumped 10 percent in May to a seasonally adjusted annual rate of $309.5 billion. Manufacturing starts more than doubled over the month as a large refinery broke ground. Commercial starts gained 6 percent, with only the office category losing ground. Institutional starts were down 2 percent in May, despite a large increase in healthcare projects. Year-to-date, total nonresidential building starts were down 5 percent compared to the first five months of 2020. Institutional starts were 9 percent lower, while commercial starts were down 7 percent. Manufacturing starts were up 42 percent on a year-to-date basis.

For the 12 months ending May 2021, nonresidential building starts were 19 percent lower than the 12 months ending May 2020. Commercial starts were down 20 percent, while institutional starts fell 14 percent. Manufacturing starts dropped 43 percent in the 12 months ending May 2021.

The largest nonresidential building projects to break ground in May were the $1.5 billion Diamond Green Diesel refinery in Port Arthur, Texas, the $920 million Michigan Medicine Clinical Inpatient Tower in Ann Arbor, Michigan, and the $475 million University of California Living and Learning dorm project in San Diego.

By Region 

Regionally, May’s starts rose in the Midwest, South Atlantic, and West regions but fell in the Northeast and South Central regions.