Leading Index for Commercial Real Estate Decreased in July

by Calculated Risk on 8/08/2023 02:42:00 PM

From Dodge Data Analytics: Dodge Momentum Index Recedes 1% in July

The Dodge Momentum Index (DMI), issued by Dodge Construction Network, declined 0.9% in July to 193.4 (2000=100) from the revised June reading of 195.1. Over the month, the commercial component of the DMI remained relatively flat, ticking down 0.2%, while the institutional component fell 1.9%.

“While both segments of the Index fell this month, underlying project data points to divergent trends in the nonresidential sector,” said Sarah Martin, associate director of forecasting for Dodge Construction Network. “In comparison to January 2023, commercial planning activity is down 10% through July, while institutional planning is up 16%. Distinctly large institutional projects entering planning in May temporarily inflated month-to-month trends, but activity has since ticked down. As we progress through the remainder of 2023, weaker commercial activity, resulting from tighter lending standards and higher interest rates, will counter sturdier institutional activity, bolstered by public funding and less sensitivity to interest rates.”

All commercial sectors pulled back, or remained flat, over the month of July. Hotel planning saw the largest month-over-month decay, marking four months of consecutive decline in the sector. July also saw a deceleration in the number of education and healthcare projects entering planning — the two largest institutional segments.

The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.
emphasis added

Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 193.4 in July, down from 195.1 the previous month.

According to Dodge, this index leads “construction spending for nonresidential buildings by a full year”.  This index suggests some slowdown towards the end of 2023 or in 2024.  

Commercial construction is a lagging economic indicator.

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