Economy Watch: Commercial Construction Planning Sees Uptick in May

Both the commercial and institutional components of the Dodge Momentum index increased for the month, suggesting that construction activity for commercial buildings will continue to rise over the next year, according to the latest Dodge Data & Analytics report.

Source: Dodge Data & Analytics, May 2017
Source: Dodge Data & Analytics, May 2017

Following a dip in April, the Dodge Momentum Index advanced in May to 139.1 (2000 = 100) from its revised April reading of 133.7, according to the latest report by Dodge Data & Analytics, which specializes in construction industry data. The index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a year.

In May, the commercial component of the Momentum Index increased to an eight-and-a-half year high, which suggests that construction activity for commercial buildings will continue to rise over the next year, even with signs of slowing improvement in market fundamentals (occupancies and rents). The institutional component of the index rose in May as well, making a partial rebound after pulling back in April.

Institutional projects rebound

During this year’s first quarter, the institutional component had re-established its often hesitant upward trend, up 21 percent in March compared to the end of 2016. May’s moderate gain, following the April retreat, provides evidence that an upward trend for the institutional sector remains underway, Dodge posited.

In May, six projects each with a value of $100 million or more entered the planning phase. For the commercial building sector, the leading projects were the $245 million Camden Partners office tower in Camden, N.J., and the $140 million first phase of the Gateway of the Pacific office complex in San Francisco. The leading institutional building project was a $100 million detention center in Conroe, Tex.