This story is part of a series of articles looking at the health of the construction industry in areas across the country. Click here to access the series.
Total construction starts in the US Northeast improved 20% in 2021, ahead of national start growth, according to a Dodge Construction outlook webinar. But activity has slowed in the first part of 2022.
“Northeastern states will have to continue to contend with the wide range of headwinds that will remain present in 2022 — high inflation, supply chain issues, variants of COVID-19 and a fairly sensitive consumer and investor climate,” said Sarah Martin, senior economist at Dodge; . “So we could see slower-than-forecast growth in the Northeast, especially as the risk of a recession rises.”
Education and health care construction starts led the non-residential category in the Northeast, which consists of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. This mirrors construction trends in other regions of the US, like the Westwhere the training begins led to the area as well.
Education
For 2022, Dodge projects education startups in the Northeast will reach $14.9 billion, a 19 percent increase from a year ago. Along with campus projects, the education category also includes research labs, according to Dodge. Pharmaceutical laboratories, on the other hand, fall under the category of manufacturing, another growing industry in the region.
“Education leads the pack as the largest sector in the Northeast,” Martin said. “Education starts are expected to continue to improve this year as more students return to classrooms both on the K-12 side and at colleges and universities.”
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Sebastian Obando/Construction Dive, data from Dodge Data & Analytics
For example, some major educational projects include the $388 million Rutgers University Cancer Institute and the $250 million Lincoln Street Laboratory Laboratory and Garage in Boston.
The biggest nor'easter starts from October 2021 to March 2022
| Work | Type | Location | Start month | value |
|---|---|---|---|---|
| Vineyard Wind 1 Energy Development | Environmental | Barnstable, Massachusetts | November 2021 | 1.6 billion dollars |
| JFK Airport Terminal 4 Expansion | Transport | Queens, New York | January 2022 | 1.5 billion dollars |
| East Coast Resilience Project | Flood control | New York | December 2021 | $1.27 billion |
| Amtrak Gateway Bridge Improvement | Bridge | Secaucus, New Jersey | January 2022 | $1.04 billion |
| Moses-Adirondack Trail Smart | Environmental | New York | October 2021 | 484 million dollars |
| Rutgers Cancer Institute | Education | New Brunswick, New Jersey | January 2022 | 388 million dollars |
| Anaerobic digester plants | Sewer | Hunts Point, New York | March 2022 | 309 million dollars |
| Baron Winds Project 121MW PH1 | Environmental | Cohocton, New York | November 2021 | 297 million dollars |
| Amazon Robotics Fulfillment Center | Warehouse | Johnston, Rhode Island | February 2022 | 290 million dollars |
| Mixed Use Broad & Washington | Apartment | Philadelphia | January 2022 | 275 million dollars |
SOURCE: Dodge Data & Analytics
Health Care
Another growing sector in the region includes healthcare construction. Dodge predicts 2022 starts for this sector to reach $6.25 billion, a 50% increase from 2021. This category includes hospitals, clinics and nursing homes.
Richard Branch, Dodge's chief economist, said he expects growth opportunities specifically in hospital-in-hospital construction.
“There's been a huge underinvestment in the hospital side of the market here in the United States,” Branch said. “This will definitely allow this market to grow. I think inpatients will outpace outpatients.”
Martin said that as people move out of large metro areas to high-cost cities in the Northeast, that could spark health care growth in more rural areas of the region, such as New Hampshire, Vermont and Maine, which had of the highest rates in immigration since the start of the pandemic.
Manufacturing
Dodge estimates production starts in the Northeast will reach $2.99 billion in 2022, or 47% year-over-year growth. However, that's just a slice of the manufacturing activity in the West, for example, where Dodge projects to reach $14.39 billion in 2022.
Impact of inflation
At face value, these increases are impressive. But inflation is boosting the growth numbers, Martin said.
For example, adjusted for inflation, the projected drop in education in 2022 from 19% growth to 7%. Projected non-building starts in 2022, such as highways, bridges, power plants and natural gas plants, fall from an 8% increase to a 3% contraction when inflation is taken into account.
Similar to the rest of the U.S., Dodge forecast office starts in 2022 in the Northeast region to fall to $8.35 billion, down 17% from 2021. Hospitality starts are expected to drop to $1 billion, down 4% from in 2021.
Northeast leaders and laggards
New York led the Northeast in 2021 with about $41.27 billion in total construction starts, up 18% from 2020. Despite the growth, starts still lagged the pre-pandemic level of $50.71 billion seen in 2019. And by April, construction had slowed.
For the first four months of 2022, nonresidential construction activity in the New York, Northern New Jersey and Long Island area fell 4%.
Pennsylvania ranked second in the Northeast region, with about $22.2 billion in total construction starts in 2021, up 32% from 2020 and above 2019 totals. But for the first four months of 2022, construction activity non-residential in Pennsylvania fell 12%.
Connecticut posted the only negative growth in construction starts in the Northeast in 2021, down 6 percent from 2020, according to Dodge. Following the regional trend, non-residential construction in The state decreased by 27% the first quarter of 2022.
Expectations for GDP growth in 2022
Dodge projects that both Connecticut and Rhode Island's GDP will grow by 3.8% in 2022, behind only Massachusetts' projected 4.1% growth in the Northeast.
New York and Pennsylvania are tied for growth of 3.2 percent and 3 percent, respectively, according to Dodge. This falls short of the national GDP forecast of 3.5%.
Increase in state GDP of North East region
| condition | 2017 | 2018 | 2019 | 2020 | 2021 | *View 2022 |
|---|---|---|---|---|---|---|
| Massachusetts | 1.9% | 3.8% | 2.9% | -3.7% | 6.4% | 4.1% |
| Rhodes island | -0.6% | -0.2% | 1.4% | -3.4% | 5.5% | 3.8% |
| Connecticut | 1.7% | 1.1% | 0.6% | -6.2% | 4.2% | 3.8% |
| New Hampshire | 0.7% | 1.9% | 2.1% | -2.1% | 8.5% | 3.6% |
| New Jersey | 0.4% | 2.4% | 2.1% | -4.6% | 4.9% | 3.3% |
| New York | 1.2% | 2.7% | 2.5% | -5.0% | 5.0% | 3.2% |
| Pennsylvania | 0.9% | 1.4% | 1.7% | -4.5% | 4.4% | 3.0% |
| Vermont | 0.3% | 0.4% | 1.0% | -4.2% | 3.5% | 2.7% |
| Maine | 2.0% | 2.7% | 2.2% | -1.1% | 5.2% | 2.4% |
SOURCE: Dodge Data & Analytics
