While nonresidential construction is moving upwards, recent spikes in coronavirus cases in some states could dampen recovery, according to a construction industry chief economist.

Total construction starts increased 6 percent in June to $641.4 billion – the second consecutive monthly gain in construction starts following the COVID-19 induced declines in March and April, according to a recent report by Dodge Data & Analytics, a provider of analytics and other data-driven research for the construction industry.

"Construction starts activity remains significantly weaker than year-ago levels, even though it has been slowly increasing since its nadir in April," said Richard Branch, Chief Economist for Dodge Data & Analytics in prepared remarks. "May's gain in starts was fueled by a handful of very large projects, but June's gain appears to be much more organic in nature."

The three largest nonresidential building projects to break ground in June, based on the Dodge Data report, were the $384 million Women's and Children's hospital tower in San Antonio, Texas; the $306 million Aligned Energy Data Center in Ashburn, Virginia; and the $294 million renovation of SeaTac International Airport in Seattle, Washington.

In June nonresidential building starts gained 6 percent from the previous month, totaling $198.5 billion, up from $186.8 billion in May. By comparison non-building starts – the only other sector to show an uptick, rose 27 percent in the same time frame.

Through the first six months of the year, overall construction starts decreased 14 percent from the same period in 2019. Nonresidential building had a bigger dip, down 22 percent, going from $147.8 billion in the first half of 2019 to just under $115 billion for the first half of 2020.

Non-residential starts fell 22 percent for the first half of the year, compared to a14 percent decrease for non-building starts, and a 5 percent dip for residential starts.

Nonresidential building starts were down 7 percent year-to-date for this year compared to the same period in 2019.

Branch said based on the uptick in June, he expected construction starts to continue to post modest gains in coming months, but warned the alarming spikes in positive COVID-19 cases in the South and West in recent weeks could derail the recovery as some states in those regions have rolled back their reopenings.

"The recent acceleration in new COVID-19 cases in states such as Texas, Florida, and California is a significant downside risk to the economy and the construction industry's growth trajectory," Branch said.

Instant Insights /

Construction Shows Signs of Life, But Recent COVID-19 Trends Could Derail Recovery

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