In December, the construction sector experienced a slight downturn, with overall starts slipping by 2% to a seasonally adjusted annual rate of $1.2 trillion, as reported by Dodge Construction Network. Despite this monthly decline, residential and nonresidential segments showed resilience, with residential starts rising 4% and nonresidential starts inching up 2%. However, infrastructure projects like highways and bridges saw a significant 14% drop, contributing to the overall decrease. Key factors influencing these trends include labor shortages, material price hikes, and policy uncertainties. Nonetheless, experts predict that ongoing project planning and potential Federal Reserve rate cuts could bolster construction growth in the coming years.
The year ended on a positive note for the construction industry, with total starts finishing 6% higher in 2024 compared to the previous year. Residential and nonbuilding sectors each saw a 7% increase in groundbreakings, while nonresidential starts grew by 4%, driven primarily by a robust 16% rise in institutional projects such as hospitals and educational facilities. Commercial construction, including offices, retail, and warehouses, surged by 8%, though manufacturing starts fell by 35% year-over-year.
December's performance was particularly noteworthy for its mixed results. Nonresidential starts increased slightly by 2%, fueled by gains in data centers, hotels, and retail developments. Manufacturing starts also showed improvement, jumping 19% in the final month of 2024. Conversely, nonbuilding starts declined sharply by 14%, while residential groundbreakings rose modestly by 4%. These fluctuations highlight the dynamic nature of the construction market, influenced by both economic and policy factors.
Sarah Martin, associate director of forecasting at Dodge Construction Network, noted that rate cuts prior to December provided some momentum for multifamily and commercial projects. However, challenges remain, including sustained labor shortages and elevated material costs. Despite these risks, Martin remains optimistic about the future, anticipating that continued project planning and further Federal Reserve rate cuts will support construction growth in 2025.
Several major projects broke ground in December, signaling significant investment in various sectors. Notable among these are the $1.6 billion Lyndon B. Johnson Hospital replacement in Houston, the $1.2 billion expansion of San Antonio International Airport Terminal C, and the $1.1 billion Hard Rock Hotel in Las Vegas. Other substantial developments include a water purification facility in Los Angeles, solar farms in Illinois and Missouri, luxury residences in Miami and The Woodlands, and resorts in Florida. These projects underscore the diverse and ambitious nature of current construction activities across the United States.
While December brought a slight dip in overall construction starts, the year concluded with a solid 6% growth compared to 2023. The residential and nonbuilding sectors demonstrated strong increases, and despite challenges in manufacturing, the outlook for 2025 appears promising. Experts anticipate that favorable conditions and strategic planning will continue to drive the construction industry forward, supported by potential policy adjustments and economic incentives.