Dive Brief:
- The Dodge Momentum Index, a benchmark that measures nonresidential construction planning, jumped 6.1% in April largely due to a surge in data center proposals, according to the Dodge Construction Network.
- Institutional plans, such as those for education, life sciences and healthcare projects, tumbled 6.3%, while commercial planning, which includes data centers, increased 12.6%.
- “The Dodge Momentum Index saw positive progress in April, alongside a deluge of data center projects that entered the planning stage,” said Sarah Martin, associate director of forecasting at Dodge Construction Network. “Outsized demand to build cloud and AI infrastructure is supporting above-average activity in the sector.”
Dive Insight:
The increase in data center planning reverses a two-month contraction streak, according to Dodge data.
Several publicly traded construction companies also recently highlighted data center construction as an increased focus during the latest round of earnings calls.
However, apart from this emerging data center boom, most other construction categories still faced slower growth over the month, said Martin. For example, traditional office and hotel projects continued to face slower momentum in April, according to Dodge. Warehouse planning also remained flat.
On the institutional side, education and healthcare planning dropped again, partly due to another month of weak life science and lab activity.
That’s largely due to owners and developers still grappling with uncertainty around interest rates and lending standards, thus delaying decisions to push projects into the planning queue, said Martin.
Nevertheless, she added that if interest rates begin to tick down in the latter half of 2024, expect substantive growth in nonresidential planning activity to follow. That said, future interest rate cuts in 2024 have become less of a certainty, as a strong jobs market and stubbornly persistent inflation has stayed the Federal Reserve’s hand on loosening monetary policy.
Year over year, the Dodge Momentum Index dropped 1% compared to April 2023. The commercial segment jumped 6% from last April, while the institutional segment decreased 15% over the same period.
Economic challenges linger on architectural billings
The Architectural Billings Index, an indicator for construction work nine to 12 months out, tumbled for the fourteenth straight month, according to the most recent data from the American Institute of Architects. The AIA report pegs the drop to overall economic issues, such as inflation and supply chain woes, continuing to affect billings.
Notably, the value of new signed design contracts remained flat in the most recent AIA report, which has generally been the trend for the last year and a half. This shows clients are interested in starting new projects but remain hesitant to sign a contract and officially commit, according to the AIA.
A total of 25 projects valued at $100 million or more entered planning in April, according to Dodge. The largest commercial projects included:
- The $1 billion Convergent Technology Park in Remington, Virginia.
- The $630 million Dulles Digital Data Center in Dulles, Virginia.
- The $330 million Google Red Hawk Data Center in Mesa, Arizona.
The largest institutional projects to enter planning included:
- The $275 million Win-River Resort and Casino in Redding, California.
- The $254 million AdventHealth Hospital in Weaverville, North Carolina.
