The Dodge Momentum Index (DMI) experienced a notable decrease of 2.3% in November, dropping to 191.5 from a revised October figure of 196.0.
This decline reflects a complex interplay of factors affecting nonresidential planning activity, with commercial planning experiencing a significant dip of 4.6% while institutional planning saw a modest improvement of 2.5%.
Issued monthly by the Dodge Construction Network (DNC), the DMI serves as a critical indicator of the value of nonresidential building projects currently in the planning stage. Historically, the DMI has proven to be a reliable predictor of construction spending for nonresidential buildings, often leading actual spending trends by a full year.
According to Sarah Martin, associate director of forecasting at DNC, the current landscape of nonresidential planning is characterized by robust growth throughout 2024. However, persistent labor shortages and elevated construction costs have hindered the normal progression of these projects through the planning pipeline. Martin notes that the existing backlog of projects may be constraining demand for commercial planning in the short term. Additionally, uncertainty surrounding new tariff and immigration policies under the incoming Trump administration may be causing developers to hesitate, though it remains too early to determine the extent of this impact.
In the commercial sector, November’s DMI score was adversely affected by a slowdown in planning for data centers, office spaces, warehouses, and retail establishments. Conversely, the institutional sector demonstrated resilience, buoyed by strong growth in education project planning. Notably, the institutional portion of the DMI has shown growth in five of the past six months, highlighting a shift in focus towards educational infrastructure.
Despite the month-over-month decline, the DMI remains 12% higher than the levels recorded a year ago. The commercial segment has increased by 13% compared to November 2023, while the institutional sector has seen an 8% rise during the same period. This year-over-year growth signals a continued interest in nonresidential projects, albeit with varying dynamics across sectors.
Throughout November, 17 projects valued at $100 million or more entered the planning phase. Among the largest commercial projects were the $350 million Bally’s Hotel Tower and Casino in Las Vegas and the $312 million Accokeek Data Center in Stafford, Virginia. In the institutional arena, significant projects included the $465 million student dormitory at UC Berkeley and the $323 million Intensive Treatment Tower at Texas Health Presbyterian in Plano, Texas.
Looking ahead, the easing of monetary policy is anticipated to alleviate the backlog of projects in the planning queue, potentially spurring increased demand for new projects in the coming months. As the construction industry navigates these challenges, stakeholders will be closely monitoring the DMI and its implications for future nonresidential construction activity.
While the recent decline in the DMI may raise concerns, the underlying growth trends and significant project entries suggest a resilient sector poised for recovery, contingent upon overcoming current obstacles and uncertainties.
Source: USGlass with additional information added by GlassBalkan
