Planning activity picks up ahead of Fed meeting

Brief description of the dive:

• The Dodge Momentum Index, a benchmark for measuring non-residential construction planning, increased by 2.9% in August due to broad-based growth in the commercial and institutional sectors, according to Dodge Construction Network.
• Commercial planning, which includes office, industrial and hotel projects, rose 1.9% in August, while institutional planning, which includes education, life sciences and healthcare projects, rose 5.7% over the month.
• “With the Fed’s September rate cut now all but complete, the impact of selective lending standards and inflation should ease next year, along with modest improvements in consumer demand,” said Sarah Martin, associate director of forecasting at Dodge Construction Network. “As a result, stronger planning activity was widespread in August, with most nonresidential sectors seeing growth.”

Diving Insight:

Owners and developers were still waiting for a planning decision in August, Martin said, expecting better market conditions next year.

For example, hotel and retail planning has been is constantly expanding over the past few months, while data center projects continued to dominate overall planning activity. However, Martin noted that these increases were tempered after several months of very strong growth.

Even warehouse projects, after slowing down in recent yearshas seen positive momentum over the past three months, according to Dodge. On the institutional side, health care project planning fueled the sector’s growth in August, Martin said.

On a year-over-year basis, DMI was up 31% compared to August 2023, according to the report. The commercial segment was up 42% from year-ago levels, while the institutional segment jumped 8% during the same period.

A total of 30 projects valued at $100 million or more entered planning in August. The largest commercial sector projects included:

• Part of the $500 million Tract data center complex in Yuma, Arizona.
• $462 million KDC data center campus in Irving, Texas.

The largest institutional projects that entered the planning phase included:

• The $440 million Geisinger Medical Center tower in Danville, Pennsylvania.
• $240 million research facility at the University of Cincinnati in Ohio.

Nevertheless, conditions in architectural firms remain sluggish. The Architectural Billings Index, a gauge of construction activity over a nine- to 12-month period, reported a decline in billings for the 18th consecutive month, according to the latest data from the American Institute of Architects.

There is a silver lining, however, as fewer businesses reported a decline in bills in July compared with May. Despite this, more than half of businesses are still experiencing weak business conditions, according to the report.