According to Dodge Data & Analytics, new construction starts in June advanced 9% from the previous month with increases in nonresidential building, office buildings, public buildings, healthcare facilities, and warehouses. However, through the first six months of 2019, total construction starts on an unadjusted basis were down 8% from the same period a year ago.
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Despite the improvement shown by Dodge Data & Analytics’ Dodge Momentum Index in June, planning for commercial and institutional building projects has clearly stepped back from the torrid pace set during the first half of 2018. Indeed, the average of the overall Momentum Index through the first six months of 2019 was 4.3% lower than the same period a year ago, with the commercial component down 5.2% and the institutional component down 3.0%.
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The overall Dodge Momentum Index is down 8.5% since April 2018, with the commercial component 4.7% lower and the institutional component 13.9% lower. However, over the past several months the Momentum Index has moved in a crablike fashion with neither strong gains or losses. This suggests that there continues to be a reasonably healthy number of projects in the planning pipeline to support a moderate level of construction activity in the coming months.
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The March uptick was due to a 2.8% increase in the commercial component of Dodge Data & Analytics’s Dodge Momentum Index, while the institutional component fell 3.0%.The overall Momentum Index has essentially moved sideways and stayed within a very narrow band of activity since the fall of last year. This is highly indicative of where building markets currently are at this late stage of the construction cycle.
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In February, nine projects each with a value of $100 million or more entered planning. The leading commercial building projects were the $200 million Keurig/Dr. Pepper office project in Frisco TX and a $200 million mixed-use development in San Jose CA.
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The Dodge Momentum Index rose 4.7% in January. January’s increase reflected similar gains for the two components of the Momentum Index – institutional building, up 5.0%; and commercial building, up 4.6%.
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During the final six months of the year, the Dodge Momentum Index fell 4.4%, with the commercial component losing 7.2% and the institutional component remaining essentially flat. This suggests that spending for commercial buildings may be reaching its cyclical peak.
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The Dodge Momentum Index moved 4.2% lower in October. The commercial component fell by 4.9% from September to October, while the institutional component dropped 3.1%. The institutional component, meanwhile, has been relatively more stable due to the availability of public funds for projects such as schools and airport terminals.
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The Dodge Momentum Index dropped 2.6% in September to 159.5 from the revised August reading of 163.7. The Momentum Index may seem to have lost some impetus, but this can be attributed to outsized gains in the late spring and summer. In fact, the Momentum Index is now returning to a more sustainable level of activity given the overall age of the current construction cycle.
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Pushing the Dodge Momentum Index lower in August was its commercial component, which dropped 6.1% from July. The commercial component had been on a strong run since the beginning of the year, rising 25% in the January to July period as improved business confidence likely pushed building intentions higher. While commercial planning did fall in August, the trend remains positive fueled by strong economic growth and still-healthy real estate fundamentals.
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