This story is the fifth in a series focusing on the health of the construction industry in regions across the country.
Total housing starts in the South region grew 13% in 2021, which is similar to national housing starts growth of 14%, according to a construction outlook webinar from Dodge Data & Analytics.
“Unlike the emigration we’re seeing in the Northeast and Midwest, the South has seen net migration into the region over the past two years,” said Sarah Martin, senior economist at Dodge, during the webinar. “Construction activity remained flat,” she said, noting that residential activity was driving the momentum.
The largest nonresidential areas in the South region, which includes Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, Carolina North, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia, include warehouses and educational institutions, according to Dodge data.
For 2022, Dodge projects warehouse starts in the South region to reach $21.51 billion, a 16% increase from a year ago.
But the warehouse sector is starting to slow its acceleration. Amazon, one of the largest users of US industrial space, recently announced a reduction of its e-commerce activities. Dodge Chief Economist Richard Branch said the move will affect construction activity in the warehouse sector, especially after 2022.
“We believe the warehouse market is growing this year, but once we enter 2023 and throughout our five-year forecast, the warehouse sector will start to pull back,” Branch said. “Not aggressively, but we will start to see a decline in warehouse construction going forward.”
In the South region, the 16% increase in warehouses expected this year is only half the pace of 2021, when warehouse starts jumped 31%. Even in 2019, the year before the pandemic, the warehouse sector grew 39% from its 2018 level, according to Dodge data.
Dodge forecasts education starts in the South, the region’s largest sector, to reach $25.56 billion in 2022, an 18% increase from a year ago.
Martin said it’s likely that K-12 construction and colleges will have more confidence to invest in their infrastructure this year as the uncertainty around the pandemic fades.
For example, in November, the district of Fort Worth in Texas approved a Obligation of 1.2 billion dollars to renovate all the colleges in the district and build new elementary schools. Similar measures are being adopted across the region, Martin said.
“Activity is expected to pick up quite strongly this year,” Martin said.
Dodge expects manufacturing in the South to start hitting $12.82 billion in 2022, up 3% from a year ago. On the other side other parts of the United Stateshousing starts in the sector are increasing due to a renewed desire to bring more manufacturing plants back to the United States
For example, four of the 10 largest commercial projects in the last 12 months in the Southern region are in the manufacturing sector. This includes the $1.5 billion US flat-rolled steel plant at Big River in Osceola, Arkansas and the $1.3 billion Methanex methanol plant in Geismar, Louisiana.
Largest housing starts in the South in the last 12 months
|Venture Global LNG Export Facility||Gas||Louisiana||October 2021||$8.5 billion|
|U.S. Steel Flat-Roll Plant in Big River||Manufacturing||Osceola, Arkansas||February 2022||$1.5 billion|
|Methanex #3 methanol plant||Manufacturing||Geismar, Louisiana||October 2021||$1.3 billion|
|1 Mixed-use Southside Park||Apartment||Miami||December 2021||$710 million|
|Danimer Scientific Plant Expansion||Manufacturing||Bainbridge, Georgia||December 2021||$700 million|
|Robley Rex VA Medical Center||Hospital||Louisville, Kentucky||November 2021||$693 million|
|Installing JM Smucker Inlays||Manufacturing||McCalla, Alabama||January 2022||$550 million|
|LA1 Asphalt Concrete Repair Ph II||Bridge||Golden Meadow, Louisiana||January 2022||$464 million|
|RiverRenew Tunnel System Project||Waste||Alexandria, Virginia||October 2021||$454 million|
|Loews Hotel & Convention Center Ph II||Hotel||Arlington, TX||October 2021||$445 million|
SOURCE: Dodge Data and Analytics
But in the South region, that 3% growth percentage is a significant drop from last year, when manufacturing starts in the region jumped 38% from their 2020 level.
This is largely due to material prices and continued labor shortages in the region, Martin said. In addition, high inflation is boosting the growth percentage of the sector. In real dollars, Martin said the sector is shrinking.
“Labour shortages and supply chain volatility are likely to prevent substantial growth this year,” Martin said. “But when you take that measure out of inflation, [percentage growth is] going to drop to about minus 15%.”
Southern Region Leaders and Laggards
Texas led the South region in 2021 with $114.13 billion in housing starts, up 7% from a year ago.
For the first four months of 2022, non-residential activity in Dallas-Fort Worth jumped 27%. In Austin during the first four months of 2022, non-residential activity jumped 37%.
Florida ranked second in the South region with $88.12 billion in housing starts, a 22% increase from a year ago.
For the first four months of 2022, non-residential activity in the Miami area soared 19%while non-residential activity in Tampa grew 58%.
West Virginia and Mississippi saw the largest decline in housing starts in the Southern region in 2021, falling 16% and 15% respectively from 2020, according to Dodge.
GDP growth expectations for 2022
Dodge expects four states in the Southern region to grow GDP at a faster rate than the national average of 3.5% in 2022. Delaware leads the region at 5.8%, while the Texas and Florida, the two largest construction start-up states, follow with 5.4% and 4.5% expected growth, respectively. Dodge projects that Oklahoma will increase its GDP by 4.4%.
Mississippi and Kentucky round out the region with projected GDP growth of 1.7% and 1.5%, respectively.
Southern Region State GDP Growth
|Caroline from the south||2.3%||2.6%||2.3%||-1.9%||5.9%||3.1%|
|District of Colombia||1.0%||2.4%||0.9%||-2.1%||2.8%||2.8%|
SOURCE: Dodge Data and Analytics