Total construction starts in the U.S. fell by 6% in January 2025, dropping to a seasonally adjusted annual rate of $1.1 trillion, according to the latest report from Dodge Construction Network. The decline was driven by significant drops in nonresidential and residential construction, which fell by 18% and 1%, respectively. Nonbuilding construction, however, bucked the trend with a 4% increase. Compared to January 2024, total construction starts were down 6%, with nonresidential starts plummeting 22%, residential starts dipping 2%, and nonbuilding starts rising 17%.
Despite the monthly decline, the 12-month period ending January 2025 showed overall growth, with total construction starts up 4% compared to the previous year. Residential starts increased by 5%, nonbuilding starts rose 7%, and nonresidential starts remained flat. The data highlights the ongoing volatility in the construction sector, influenced by labor shortages, high material costs, and economic uncertainty.
4Nonbuilding Construction Shows Resilience
Nonbuilding construction was a bright spot in January, rising 4% to a seasonally adjusted annual rate of $337 billion. The sector was bolstered by strong performances in highway and bridge starts, which climbed 14%, and miscellaneous nonbuilding starts, which surged 26%. Utility and gas projects also saw a modest 1% increase, while environmental public works declined by 14%.
Year-over-year, nonbuilding starts were up 17%, with utility and gas projects leading the way at an 84% increase. Miscellaneous nonbuilding starts rose 25%, and highway and bridge starts grew 10%, while environmental public works remained flat. Over the 12-month period ending January 2025, nonbuilding starts increased 7%, driven by a 26% jump in miscellaneous nonbuilding projects and a 21% rise in environmental public works.
Notable projects that broke ground in January included the 1.1billionSequoiaSolarFarm∗∗inTexas, the∗∗1.1billionSequoiaSolarFarm∗∗inTexas, the∗∗696 million NHHIP Segment 3B-2 road widening project in Houston, and the $630 million second phase of Beaver Stadium renovations in Pennsylvania.
3Nonresidential Construction Faces Challenges
Nonresidential building starts experienced a sharp decline, falling 18% in January to a seasonally adjusted annual rate of $393 billion. The commercial sector was particularly hard hit, with starts plummeting 41%, driven by weak activity in office and hotel projects. Institutional starts, however, saw a 4% increase, supported by growth in healthcare and recreational projects. Manufacturing starts also declined, dropping 16% for the month.
Year-over-year, nonresidential starts were down 22%, with commercial starts falling 18% and institutional starts dipping 1%. Over the 12-month period ending January 2025, nonresidential starts remained flat compared to the previous year. Commercial starts rose 7%, institutional starts grew 13%, and manufacturing starts dropped 45%.
Key projects that began in January included the 333 million Mid-Hudson Forensic Psychiatric Hospital in New York, and the $307 million Timber Mill High School and Athletic Field in Texas.
2Residential Construction Sees Mixed Results
Residential building starts dipped 1% in January to a seasonally adjusted annual rate of $407 billion. Single-family starts fell 2%, while multifamily starts saw a slight 2% increase. Compared to January 2024, residential starts were down 2%, with single-family starts up 6% but multifamily starts down 15%.
Over the 12-month period ending January 2025, residential starts increased 5%, with single-family starts rising 14% and multifamily starts declining 10%. The multifamily sector continues to face challenges, including higher financing costs and softening demand.
Major multifamily projects that broke ground in January included the 470millionUlanaWardVillageTower∗∗inHawaii, the∗∗470millionUlanaWardVillageTower∗∗inHawaii, the∗∗400 million JEM Residences at Miami World Center in Florida, and the $279 million Alafia Affordable Apartments in New York.
1Economic Headwinds and Future Outlook
The construction sector continues to grapple with significant challenges, including persistent labor shortages, elevated material costs, and economic uncertainty. Sarah Martin, associate director of forecasting at Dodge Construction Network, noted that the decline in nonresidential starts was partly due to a return to more typical levels of activity after a surge in data center projects in late 2024. She also highlighted concerns over tariffs and stricter immigration enforcement as potential risks to the sector.
Looking ahead, Martin suggested that construction activity is likely to remain subdued until the Federal Reserve resumes cutting interest rates, which is expected in the latter half of 2025. Until then, projects may continue to move slowly through the planning and approval stages, delaying starts and limiting growth.
Despite the near-term challenges, the construction industry remains resilient, with pockets of strength in nonbuilding and institutional sectors. As economic conditions stabilize and interest rates ease, the sector could see a rebound in activity, particularly in areas like infrastructure, healthcare, and renewable energy projects. For now, however, the industry must navigate a complex landscape of risks and opportunities.
