U.S. non-residential starts value was strong in May, and mega projects continued to accelerate

Overview

This is an industry study on the U.S. construction and rental equipment value chain, centered on updating May Dodge construction starts data and the latest mega project starts. The report shows that non-residential starts value and mega project starts remain strong, but the square footage measure, residential starts, and housing affordability still indicate uneven demand.

Core views

The report's core view is that non-residential construction value and mega project activity support engineering, rental equipment, building materials, and some electrical equipment companies; however, declining square footage, weaker residential activity, and cooling in manufacturing and EV-related projects mean that strong value data should not be simply equated with a broad-based demand recovery.

Analysis framework

The report breaks down Dodge starts data by value, area, residential/non-residential, building/non-building, and mega project categories, compares year-over-year, month-over-month, and trailing 12-month trends, and maps these macro and project data to rating views on covered companies in U.S. machinery, electrical equipment, chemicals, business services, and building materials.

Methodology notes

• Industry cycle trackingDodge construction starts

  Uses construction starts value and square footage to measure U.S. construction activity.

  The value measure reflects project value and pricing factors, while the area measure is closer to actual construction volume; when the two diverge, price, mix, and real demand need to be distinguished.

• Mega project trackingMega project starts tracking

  Tracks monthly mega project starts value, category composition, and trailing 12-month contribution.

  Mega projects include LNG, public infrastructure, data centers, manufacturing, renewable energy, and others; they are highly concentrated and have a significant impact on demand for equipment rental, engineering services, and materials.

• Rating frameworkBernstein relative equity rating

  Outperform, Market-Perform, and Underperform are ratings relative to index performance.

  Bernstein brand equity ratings are based on expected performance relative to the relevant market index over the next 12 months.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• United Rentals (URI) / Sunbelt (SUNB)

  Equipment rental names highly correlated with non-residential construction and mega project activity.

  Strengths

  Mega projects, public infrastructure, and data center construction help lift demand for rental equipment; the report maintains Outperform ratings on United Rentals and Sunbelt.

  Weaknesses

  If the square footage measure continues to weaken or residential demand remains sluggish, broad construction activity could be undermined.

  Comparison

  Compared with the residential chain, the non-residential and mega project chain is currently stronger.

  Risks

  Volatility in project start timing, changes in interest rates and developer margins, and lower equipment utilization.

• Jacobs Solutions (J)

  Engineering design and construction management benefit from advanced manufacturing and biotech construction projects.

  Strengths

  The report mentions channel checks at biotech manufacturing construction sites and argues that market concerns about AI substitution are misplaced; AI may instead enhance the business model.

  Weaknesses

  The stock had previously materially underperformed due to concerns over AI disintermediation.

  Comparison

  Compared with purely cyclical equipment companies, Jacobs has greater exposure to engineering services and high-end manufacturing construction.

  Risks

  Delays in mega projects, contraction in client capex, and AI-related narratives continuing to pressure valuation.

• Trimble (TRMB), Hubbell (HUBB), Eaton (ETN), Legence (LGN), PACCAR (PCAR)

  Covered names tied to construction, electrification, infrastructure, and industrial capex.

  Strengths

  The report maintains Outperform ratings on these names, indicating the analysts still favor their relative performance.

  Weaknesses

  Different companies have different exposure to construction cycles, truck cycles, or electrical equipment cycles, so a single starts data point cannot fully explain them.

  Comparison

  Compared with Market-Perform names, the Outperform list reflects stronger expectations for relative returns.

  Risks

  Declining non-residential physical volume, project delays, cost inflation, and weaker-than-expected order conversion.

• Caterpillar (CAT), Deere (DE), Cummins (CMI), AGCO, Oshkosh (OSK), Quanta (PWR), Titan America (TTAM)

  Covered names linked to cycles in machinery, agricultural equipment, power, engineering, and building materials.

  Strengths

  Some companies may still benefit from non-residential and infrastructure activity.

  Weaknesses

  The report maintains Market-Perform, indicating more balanced risk/reward or limited upside.

  Comparison

  Ratings are below the Outperform group, reflecting a more neutral expectation for relative market performance.

  Risks

  Divergence in end-market demand, headwinds in manufacturing projects, and transmission from rates and residential weakness.

• Arkema

  A U.S. construction recovery is part of its bullish thesis, and performance is related to U.S. starts value excluding infrastructure.

  Strengths

  Supported in the short term by the acrylics cycle, while non-residential remained strong in May.

  Weaknesses

  Residential starts have fallen back and housing affordability is low; the report says residential and non-residential fundamentals remain weak.

  Comparison

  Market-Perform is maintained, indicating coexistence of short-term support and medium-term fundamental uncertainty.

  Risks

  A renewed rise in inflation, failure of the rate-driven residential recovery thesis, and weaker-than-expected improvement in U.S. construction demand.

• Amrize, CRH, Heidelberg Materials, Sika, Saint Gobain, Rockwool, Kingspan, Geberit

  Building materials companies have varying degrees of exposure to U.S. non-residential, infrastructure, and regional construction cycles.

  Strengths

  The report favors Amrize, CRH, Heidelberg, Sika, and Rockwool, citing reasons including U.S. cement positioning, infrastructure exposure, valuation discount, or rerating opportunities.

  Weaknesses

  Saint Gobain and Kingspan are more neutral, while Geberit is considered highly valued.

  Comparison

  Names such as CRH with higher beta to U.S. non-residential activity may benefit more from upside surprises in 2026 non-residential demand.

  Risks

  Weak U.S. demand, uncertainty around European policy and carbon prices, raw material costs, and political uncertainty.

Key data

• May non-residential total starts valueabout +60% year over yearHigher than the previous month's roughly 30% year-over-year growth.
• May non-residential building starts valueabout +30% year over yearUp about 25% year over year in the previous month.
• May non-residential non-building starts valueabout +100% year over yearUp about 30% year over year in the previous month.
• May non-residential square footagedown nearly 10% year over yearUp about 10% year over year in the previous month; up about 12% month over month, below the usual average of about 15%.
• May non-residential pricesabout +40% year over yearUp about 15% year over year in the previous month, showing that strong value data includes a pricing factor.
• May residential starts valueabout -7% year over yearUp about 3% year over year in the previous month; residential square footage was about -4% year over year.
• May mega project starts valueabout $33 billionUp about 100% month over month and about 420% year over year.
• Louisiana LNG export facilityabout $14 billionThe largest project start of the month, accounting for about 40% of May mega project totals.
• Mega projects as a share of non-residential startsabout 30%The report says mega projects accounted for about all non-residential starts in April, significantly above the trailing 12-month average of about 20%.
• Trailing 12-month mega project compositionLNG, public infrastructure, and data centers together about 65%Manufacturing had once been one of the largest components, but EV-related projects faced headwinds.
• Share of end markets in positive growthabout 55%By non-residential square footage, it was about 45% last month and is now close to the historical median of about 55%.

Impact & implications

For investment, strong mega projects and non-residential value data are positive for engineering services, equipment rental, electrical equipment, and some building materials companies, especially names tied to LNG, public infrastructure, and data center construction. However, the decline in residential activity, weak housing affordability, falling square footage, and headwinds in manufacturing projects indicate that the recovery is not comprehensive, so investment judgments need to place greater emphasis on exposure to specific end markets and project mix.

Risks

• Strong non-residential value data may partly reflect price increases rather than expansion in real construction volume.
• Non-residential square footage declined year over year, showing that physical activity has not improved comprehensively.
• Residential starts value and square footage declined, and housing affordability remains below 2019-2020 levels.
• Mega projects are highly concentrated, with a single LNG project accounting for about 40% of monthly mega projects, so monthly data may be highly volatile.
• Manufacturing projects, especially EV-related ones, are facing headwinds, which could weaken the prior advanced manufacturing construction thesis.
• Inflation and interest rates may weigh on the residential recovery and affect developer margins and project starts.
• The report covers multiple companies and includes disclosed investment banking business, holdings, or market-making relationships, so ratings should be used in conjunction with conflict-of-interest disclosures.

What to watch

• Whether subsequent Dodge non-residential starts value and square footage improve back in sync.
• Whether LNG, public infrastructure, and data centers continue to contribute the main incremental growth within mega projects.
• Whether changes in housing affordability, inflation, and interest rates alter the trend in residential starts.
• Whether manufacturing and EV-related projects continue to weaken or show signs of restarting.
• Whether orders, utilization, and guidance from equipment rental, engineering services, electrical equipment, and building materials companies validate the starts data.
• Whether U.S. non-residential demand in 2026 delivers the upside surprise implied by the report.