Slower Data Center Growth Causes Cooling in Construction Planning

The pace of construction planning has slowed in recent months due to labor shortages and high construction costs, which have hindered projects from progressing through the pipeline as expected, according to Dodge Construction Network.
November saw a decline in nonresidential construction planning activity, marking the third consecutive month of cooling, the report stated. The Dodge Momentum Index, which tracks nonresidential construction planning, fell by 2.3% in November. This drop was primarily driven by a 4.6% decrease in commercial activity, although a 2.5% rise in institutional planning helped to partially counterbalance the downturn.

The slowdown in commercial planning was largely due to reduced activity in data centers, offices, warehouses, and retail projects, while the institutional sector saw growth, particularly in education-related projects. Institutional planning has experienced an uptick in five out of the last six months, according to Dodge.
“Throughout 2024, we’ve seen robust growth in nonresidential planning activity — but labor shortages and high construction costs have prevented those projects from moving through the planning process at a normal pace,” explained Sarah Martin, associate director of forecasting at Dodge Construction Network. “Uncertainty over new tariff and immigration policies under President-elect Trump’s administration may also generate some pause with developers, although it’s a bit too early to tell if that’s the primary factor here.”
Despite the recent decline, the index is still 12% higher compared to November 2023. Commercial planning has seen a 13% increase year-over-year, while institutional planning grew by 8%.
Data centers continue to play a significant role in this growth, with their inclusion boosting the overall numbers. Without them, commercial planning would have dropped by 6%, and the overall DMI would have seen a slight decrease of 1%, according to Dodge.
Looking ahead, Martin remains optimistic, anticipating a recovery in construction activity. She noted that easing monetary policy is expected to help clear the backlog of projects by 2025 and eventually stimulate further demand for construction.
In November, 17 projects valued at $100 million or more entered planning, with notable commercial projects including:
- A $350 million Bally’s hotel tower and casino in Las Vegas.
- A $312 million data center in Accokeek, Virginia.
Among the largest institutional projects to begin planning were:
- A $465 million student dormitory at UC Berkeley, California.
- A $323 million intensive treatment tower at Texas Health Presbyterian in Plano, Texas.
The slowdown in construction planning, influenced by labor shortages, high costs, and reduced activity in key commercial sectors like data centers, reflects the challenges facing the industry despite year-over-year growth. Institutional planning, particularly in education, offers a silver lining, with several significant projects entering the pipeline. While uncertainty surrounding policy changes under the incoming administration adds to hesitancy, experts remain optimistic about a recovery by 2025, supported by easing monetary policies and a projected clearing of backlogs.
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