Total construction starts rose 6% from July to August at a seasonally adjusted annual rate, Dodge Construction Network reported [8] on Tuesday. Nonbuilding starts jumped 17% and residential starts climbed 5% but nonresidential starts dipped 2%. On a year-to-date basis through August, total construction starts were up 4% from the first eight months of 2023. Nonbuilding starts slipped 1% year-to-date, with miscellaneous nonbuilding starts up 9%, environmental public works starts up 8%, highway and bridge starts up 2%, and utility/gas starts down 17%. Nonresidential building starts rose 3% year-to-date, with institutional starts up 13%, commercial starts unchanged, and manufacturing starts down 16%. Residential starts were up 8% year-to-date, with single-family starts up 19% and multifamily starts down 10%.

Inflation-adjusted gross domestic product (real GDP), a measure of the total value of goods and services produced in the U.S., increased in 49 states and the District of Columbia at a seasonally adjusted annual rate in the second quarter (Q2) of 2024, the Bureau of Economic Analysis reported [9] today. Construction accounted for 4.5% of GDP. The construction industry share of state GDP ranged from 8.0% in Utah and 7.8% in Nevada to 1.1% in D.C. and 2.9% in Connecticut and New York.

“In August, growth in the pre-construction project pipeline [for utility-scale solar, battery, and onshore wind projects in the U.S.] was +2.7% [year-over-year], our proprietary [last 12 months (LTM)] project ‘starts’ +20.8%, and projects under construction were down 7.3%,” investment firm Stifel reported [10] on Wednesday. “We view project starts and projects under construction as directional proxies for [engineering and construction] industry activity in clean energy. Slower activity in projects under construction is being driven by slower wind starts as well as strong project completion activity in solar and batteries. Strong completion activity is in part being driven by a healthier supply chain following challenges in 2022 (particularly panels). The project pipeline/LTM ‘starts’ ratio of 2.2x continues to suggest heathy project start activity over the next year. Additionally, the size of the clean energy project pipeline remains at all-time highs and project cancellations appear to have peaked after a spike in 2023. Historically, more than 90% of projects in the pre-construction pipeline are ultimately constructed.”

Investment firm TRG “recently spoke with large” nonresidential general contractors (GCs), the firm reported [11] on Wednesday. “These companies, which perform mid-sized to megaprojects, are experiencing a robust 2024 and have enough backlog to support strength for 2025. One contact noted that they have already hit their 2024 goal of ‘selections’ (or new wins), which is much earlier than usual. As one contact stated, the key factor for owners of these projects is not interest rates, but speed to market. While ‘local markets’ projects are more flattish (some regions modestly down, some modestly up) for rates, megaprojects remain robust. The robustness includes work in-flight now, backlog, and more projects coming up for bid. Some projects in backlog are not slated to start for years, as they are part of a multi-phased project. One contact stated that the projects are large given the priority of speed to market over lowest cost, pricing and margins remain favorable and quality skilled GCs are winning the work. The makeup of work includes: data centers, stadiums, industrial facilities of all types (batteries, advanced technology, etc.), airports, [and] renewables of all types…. The subcontractors market remains stretched thin, particularly in the electrical-mechanical world. One GC noted that they have attracted contractors that in the past serviced the oil & gas market. But given the slowdown in oil & gas, some contractors in that market haves shifted to other industrial-type work.”

“Schedule variances related to handoffs are the #1 reason for delayed activities,” accounting for 52% of variance reasons,” software firm MOCA Systems, Inc. reported [12] on July 17. The firm “used data from the Touchplan® production planning platform to analyze over 321,042 committed activities over the last 12 months to identify what issues are having the biggest impact on construction project schedules….Variance reasons are explanations for why a planned activity that was committed to finish on a certain date was not completed as planned….Variances related to staffing/crew/manpower are the second-highest reported variance reason [20% of reasons], indicating the impact of the skilled labor shortage on project schedules.” Other frequently cited reasons include material/equipment-related issues (14% of reasons), design issues/changes (6%), and weather (5%).

State and local property-tax revenue increased 9.1% in the four quarters through Q2 2024 from the four quarters through Q2 2023, the National Association of Home Builders reported [13] today, based on Census Bureau estimates [14]. “Dating back to 2012, the average year-over-year growth is 4.0%.” The elevated growth rate is a favorable indicator for public school construction, which relies heavily on property taxes for funding.