Dodge Data & Analytics (https://www.construction.com/
“The U.S. construction industry has moved into a mature stage of expansion,” stated Robert Murray, chief economist for Dodge Data & Analytics. “After rising 11% to 13% per year from 2012 through 2015, total construction starts advanced a more subdued 5% in 2016. An important question entering 2017 was whether the construction industry had the potential for further expansion. Several project types, including multifamily housing and hotels, have pulled back from their 2016 levels, but the current year has seen continued growth by single family housing, office buildings, and warehouses. In addition, the institutional segment of nonresidential building has been quite strong, led especially by transportation terminal projects in combination with gains for schools and healthcare facilities. As for public works, the specifics of a $1 trillion infrastructure program by the Trump Administration have yet to materialize, so activity continues to hover around basically the plateau for construction starts reached a couple of years ago. Total construction starts in 2017 are estimated to climb 4% to $746 billion.”
“For 2018, there are several positive factors which suggest that the construction expansion has further room to proceed,” Murray continued. “The U.S. economy next year is anticipated to see moderate job growth. Long term interest rates may see some upward movement but not substantially. While market fundamentals for commercial real estate won’t be quite as strong as this year, funding support for construction will continue to come from state and local bond measures. Two areas of uncertainty relate to whether tax reform and a federal infrastructure program get passed, with their potential to lift investment. Overall, the year 2018 is likely to show some construction project types register gains while other project types settle back, with the end result being a 3% increase for total construction starts. By major sector, gains are predicted for residential building, up 4%; and nonresidential building, up 2%; while nonbuilding construction stabilizes after two years of decline.”
The pattern of construction starts by more specific segments is the following:
– Single family housing will rise 9% in dollars, corresponding to a 7% increase in units to 850,000 (Dodge basis). Continued employment growth has eased some of the caution shown by potential homebuyers, while older Millennials in their 30s are helping to lift demand for single family housing. A modest boost will also come from rebuilding efforts in Texas and Florida after Hurricanes Harvey and Irma.
– Multifamily housing will retreat 8% in dollars and 11% in units to 425,000 (Dodge basis). This project type appears to have peaked in 2016, helped by widespread growth across major metropolitan markets. That strength has begun to wane in 2017, given slight deterioration in market fundamentals (rent growth, occupancies) and a more cautious bank lending stance.
– Commercial building will increase 2%, following a 3% gain in 2017, and continuing to decelerate after the sharp 21% hike back in 2016. Office construction should see further growth in 2018, helped by broad development efforts in downtown markets, and warehouse construction is supported by greater demand arising from e-commerce. However, store construction will remain weak, and hotel construction will continue to pull back from its 2016 peak.
– Institutional building will advance 3%, maintaining its upward track after this year’s 14% jump. Educational facilities should see more substantial growth next year, lifted by the passage of recent school construction bond measures. The robust volume of transportation terminal projects in 2017 may not be repeated in 2018, but activity should stay at a high level.
– Manufacturing plant construction will recede 1% in dollar terms, after surging 27% this year due to the start of several massive petrochemical projects. Next year should still see moderate growth for manufacturing plants in square footage terms.
– Public works construction will improve 3%, slightly more than the 1% growth in 2017. Highways and bridges should be helped as federal funding rises to the levels called for by the FAST Act, while the environmental categories will partly reflect reconstruction efforts related to Hurricanes Harvey and Irma. Additional benefit may come from the infrastructure program proposed by the Trump Administration, should it achieve passage in some form.
– Electric utilities and gas plants will drop 13%, falling for the third year in a row after the exceptional amount reported in 2015. Power plant construction starts will ease back as new generating capacity comes on line.
The 2018 Dodge Construction Outlook was presented at the 79th annual Outlook Executive Conference held by Dodge Data & Analytics at the Swissotel in Chicago IL. Copies of the report with additional details by building sector can be ordered here.
Related Stories
Market Data | Jul 21, 2022
Architecture Billings Index continues to stabilize but remains healthy
Architecture firms reported increasing demand for design services in June, according to a new report today from The American Institute of Architects (AIA).
Market Data | Jul 21, 2022
Despite deteriorating economic conditions, nonresidential construction spending projected to increase through 2023
Construction spending on buildings is projected to increase just over nine percent this year and another six percent in 2023, according to a new report from the American Institute of Architects (AIA).
Building Team | Jul 18, 2022
Understanding the growing design-build market
FMI’s new analysis of the design-build market forecast for the next fives years shows that this delivery method will continue to grow, despite challenges from the COVID-19 pandemic.
Market Data | Jul 1, 2022
Nonresidential construction spending slightly dips in May, says ABC
National nonresidential construction spending was down by 0.6% in May, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau.
Market Data | Jun 30, 2022
Yardi Matrix releases new national rent growth forecast
Rents in most American cities continue to rise slightly each month, but are not duplicating the rapid escalation rates exhibited in 2021.
Market Data | Jun 22, 2022
Architecture Billings Index slows but remains strong
Architecture firms reported increasing demand for design services in May, according to a new report today from The American Institute of Architects (AIA).
Building Team | Jun 17, 2022
Data analytics in design and construction: from confusion to clarity and the data-driven future
Data helps virtual design and construction (VDC) teams predict project risks and navigate change, which is especially vital in today’s fluctuating construction environment.
Market Data | Jun 15, 2022
ABC’s construction backlog rises in May; contractor confidence falters
Associated Builders and Contractors reports today that its Construction Backlog Indicator increased to nine months in May from 8.8 months in April, according to an ABC member survey conducted May 17 to June 3. The reading is up one month from May 2021.
Market Data | May 18, 2022
Architecture Billings Index moderates slightly, remains strong
For the fifteenth consecutive month architecture firms reported increasing demand for design services in April, according to a new report today from The American Institute of Architects (AIA).
Market Data | May 12, 2022
Monthly construction input prices increase in April
Construction input prices increased 0.8% in April compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today.
