In March, the construction sector witnessed a 3% increase in starts, reaching an annual rate of $1.1 trillion. Nonresidential building starts, including offices and hotels, saw a 6% rise, while nonbuilding activities like highways and bridges surged by 9%. However, year-to-date figures reveal a 9% decline in nonresidential starts compared to last year's first quarter. Despite this, commercial and institutional projects remain ahead by 3%. Chief economist Eric Gaus at Dodge Construction Network suggests that upcoming challenges may slow momentum. Rising planning delays, higher tariffs, reduced federal funding, and labor shortages are anticipated concerns.

Gaus warns that economic uncertainties and trade policies could further dampen construction activity in the coming months. This sentiment is echoed in the latest backlog report, showing over 40% of contractors expecting profit declines within six months. Nevertheless, significant projects continue to launch, such as the $3.5 billion Sunrise Offshore wind farm and others across the U.S. Commercial starts surged 21% month-over-month due to retail, office, and warehouse activity, while manufacturing rebounded sharply after a slow February. Infrastructure starts increased 9%, primarily driven by utility projects, offsetting drops in highway and environmental works.

Nonresidential and Infrastructure Growth Dynamics

March marked a notable uptick in nonresidential building and infrastructure starts, yet underlying trends indicate potential slowdowns. Commercial and institutional groundbreakings rose significantly, contrasting with institutional construction's decline. Meanwhile, infrastructure experienced a boost from utility projects, despite setbacks in highway and bridge work.

The data reveals that nonresidential building starts, such as those for offices, hotels, and healthcare facilities, leaped by 6% during March. Simultaneously, nonbuilding activities, including highways, bridges, and utility plants, surged by 9%. These gains were largely propelled by a substantial 159% spike in utility and gas projects, compensating for a 10% drop in highway and bridge work and a 26% decline in environmental public works. Commercial starts soared by 21% month-over-month, fueled by robust retail, office, and warehouse activity. Manufacturing also showed a remarkable recovery, rising by 122% following a sluggish February. Conversely, institutional construction fell by 12%, attributed to slower dormitory, government, and transportation starts. The mixed performance underscores the complex interplay of factors affecting these sectors, where growth areas coexist with declining ones.

Residential Sector Challenges and Market Outlook

While nonresidential and infrastructure sectors showed resilience, residential construction faced continued softening in March. Year-to-date figures reflect a 5% drop in residential starts, with both single-family and multifamily segments experiencing declines. Economic headwinds pose additional risks to future developments.

Residential construction has been grappling with challenges, evidenced by a 5% decrease in starts year-to-date. Single-family and multifamily starts dropped by 4% and 6%, respectively, when compared to the same period in 2024. This contraction aligns with broader economic concerns highlighted by Gaus, who anticipates that ongoing uncertainties will likely exacerbate existing difficulties. Trade policy adjustments and the broader economic climate contribute to these pressures, which are further compounded by planning delays, escalating tariffs, diminishing federal support, and persistent labor shortages. The outlook remains cautious as these obstacles persist, potentially curtailing future residential growth. Nonetheless, some large-scale projects have proceeded despite these hurdles, indicating selective progress amidst widespread challenges. This situation suggests that while certain sectors face constraints, others continue to find opportunities for advancement, reflecting the nuanced state of the construction industry today.