Macroeconomic pressures coupled with inflated project costs are weighing on developers’ appetite for new construction planning, according to Dodge Construction Network.
After a streak of record-setting months, the pipeline of future nonresidential construction shrank in October. The Dodge Momentum Index, which tracks nonresidential projects entering the planning stages and leads actual construction spending by a full year, fell 7.1% in October.
Commercial planning activity declined 2.9% during the month, along with a 15.2% drop in institutional projects, according to the report. Despite the pullback, the index still sits 35% above its year-to-date level from 2024, according to Dodge.
Indeed, compared to October of last year, planning activity climbed 52%, with commercial and institutional up 54% and 49%, respectively. However, if data center projects are excluded, commercial growth would sit at 43%, said Sarah Martin, associate director of forecasting at Dodge Construction Network, in the release.
“After several months of record-breaking levels, planning momentum slowed in October,” said Martin. “Activity remains solid across the board, especially for data centers and hospitals.”
Planning activity softened for other commercial sectors in October as well, including warehouses and hotels, said Martin. Institutional activity, which covers education projects, also lost momentum in October, she added.
That slowing level of construction planning could continue in the short term, she said, especially if contractors continue to contend with elevated project costs.
“Recent growth should not solely be attributed to gains in real activity. Anticipated increases in labor and material costs are also driving up project expenses and are inflating the overall trend in the DMI,” said Martin. “In the coming months, Dodge anticipates activity to continue to decelerate on average, especially as macroeconomic risks continue to mount.”
A total of 45 projects valued at $100 million or more entered planning in October, according to Dodge. Major commercial projects included:
- Buildings 1, 2 and 3 on the Amazon data center campus in Hamlet, North Carolina, each valued at $500 million.
- The $500 million CyrusOne Data Center in Talkington Township, Illinois.
- The $500 million Hut 8 Corp. data center in Batavia, Illinois.
The largest institutional projects to enter planning included:
- The $400 million Scripps Memorial La Jolla Medical Tower III in San Diego, California.
- The $260 million SW Life Science Park in Philadelphia.
- The $198 million Mission Hospital Expansion in Asheville, North Carolina.
