Construction Pipeline Grows For Third Straight Month, Led By Hotel, Data Center Projects
An index that tracks commercial construction projects in planning rose for the third consecutive month in November, a potential bright spot for developers and investors anxious about the industry's future.
Nonresidential building planning increased 3.8% in November, with hotels and data centers experiencing the largest growth, according to the Dodge Momentum Index. In October, the DMI showed a 9.6% increase, and it is up 25% since last year.
“The Momentum Index continued to rise in November, conveying hopefulness from owners and developers that the construction sector will endure the possible economic slowdown next year,” Dodge Construction Network Senior Economist Sarah Martin said in a press release.
The 21 projects of $100M or more that entered planning in November included two $500M phases of Meta's data center campus in Sandston, Virginia, and a $400M warehouse in Sunset Park, New York. Other big projects included the Hollywood Casino in Illinois and a courthouse in Texas.
Although the numbers are promising, the DMI report said the construction sector could still flatten out in the next year as interest rates continue to rise and other issues like labor and supply shortages make planning harder.
The demand for data center projects has remained persistent even as the country edges closer to potential economic turmoil. Two major data center REITs have been scrambling to boost their cash reserves, as demand for new facilities remains strong but rising interest rates and construction costs make projects harder to pencil.
Hotels have experienced a steady recovery in demand, but some investors and developers are worried about headwinds, primarily rising interest rates, that would affect hotel development. Deals are still flowing, but mainly in well-located areas, creating uncertainty for the rest of the market.
