Owners are introducing more projects to the planning

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Brief description of the dive:

The Dodge Momentum Index, a benchmark for measuring non-residential construction planning, increased by 7.9% in July due to noticeable growth in several commercial and institutional segments, according to Dodge Construction Network.
Commercial planning, driven by data center activity, rose 6.8% in July, while institutional planning, which includes education, life sciences and healthcare, rose 11.1% over the month.
“A potential Fed rate cut in September is becoming increasingly likely, slower inflation and weaker labor market conditions,” Sarah Martin, associate director of forecasting for Dodge Construction Network, said in a news release. “This is likely leading owners and developers to remain optimistic about market conditions in 2025 and moving more projects into the planning queue.”

Diving Insight:

The continued surge in construction planning — which is running 12 months ahead of actual construction spending — came as fresh concerns emerged this month that The US economy may be sinking into recession. In contrast to the concern surrounding last week’s soft jobs report, the planning report provides evidence that landlords and developers are simply waiting for lower rates to invest capital.

Data Center ProjectsFor example, they continue to exert a disproportionate influence over non-residential planning activity, but momentum is also gaining momentum in many other important sectors, Martin said in a press release.

For example, outside the data center giant, retail construction planning has also been steadily accelerating over the past eight months, reflecting growing confidence in the sector, Martin said. On the institutional side, health care projects led the growth in July, according to the report.

Year-over-year, DMI increased by 17% compared to July 2023, with the commercial segment up 35%. Institutional planning declined by 14% over the same period.

A total of 23 projects valued at $100 million or more entered planning in July. The largest commercial sector projects included:

The $483 million Microsoft SAT82 data center in Castroville, Texas.
The $480 million Yorkville data center campus in Little Rock Township, Illinois.

The largest institutional projects that entered the planning phase included:

$325 million renovation of UCSF Children’s Hospital in Oakland, California.
$278 million expansion of Memorial Hermann Cypress Hospital in Cypress, Texas.

But the news is not so rosy. Despite the momentum in planning, business conditions in architectural firms remain weak. The Architectural Billings Index, a gauge of construction activity over a nine- to 12-month period, fell for the 17th consecutive month, according to the latest data from the American Institute of Architects.

Despite this, architecture firms remain generally optimistic and believe that conditions will start to improve once interest rates start to fall, most likely in SeptemberAccording to the ABI report.