Dodge Outlook Report Predicts Rise in Construction Starts
for Housing, Commercial & Manufacturing Building Sectors; Stability for
Institutional Building After Lengthy Decline; Weaker Activity for Public Works
& Electric Utilities
McGraw Hill Construction part of McGraw Hill Financial
(NYSE: MHFI), released its 2014 Dodge Construction Outlook, a mainstay in
construction industry forecasting and business planning. The
report predicts that total U.S. construction starts for 2014 will rise 9% to
$555.3 billion, higher than the 5% increase to $508 billion estimated for 2013.
“We see 2014 as another year of measured expansion for the
construction industry,” said Robert Murray, McGraw Hill Construction’s vice
president of Economic Affairs. “Against the backdrop of elevated
uncertainty and federal spending cutbacks, the construction industry should still
benefit from several positive factors going into 2014. Job growth, while
sluggish, is still taking place. Interest rates remain very low by historical
standards, and in the near term the Federal Reserve is likely to take the
necessary steps to keep them low. The bank lending environment is showing
improvement in terms of both lending standards and the volume of loans.
And, the improving fiscal posture of states and localities will help to offset
some of the negative impact from decreased federal funding,” said Murray.
Based on research of specific construction market sectors,
McGraw Hill Construction’s 2014 Dodge
Construction Outlook details the forecast
as follows.
- Single family housing will grow 26% in
dollars, corresponding to a 24% increase in units to 785,000 (McGraw Hill
Construction basis). The positives for single family housing are
numerous – the pace of foreclosures has eased, home prices are rising, and
mortgage rates remain near recent lows. However, the demand for housing will
continue to be restrained by careful bank lending practices towards issuing
mortgages.
- Multifamily housing will rise 11% in
dollars and 9% in units. While growth continues, the percentage gains
will be smaller than the previous four years, reflecting a maturing multifamily
market. This structure type is still a favored investment target by the real
estate finance community, which in the near term should lead to more high-rise
residential buildings in major cities.
- Commercial building will increase 17%, a slightly faster
pace than the 15% gain estimated for 2013. Both warehouses and hotels
will continue to lead the way, while stores and office buildings pick up the
pace. The positives for commercial building are improving market fundamentals
and more bank lending for commercial development. Next year’s activity in
dollar terms will still be 28% below the 2007 peak.
- Institutional building will edge up 2%, turning the corner
after five years of decline. For the educational building category,
colleges are revisiting capital expansion plans, and passage of recent
construction bond measures in several states should help K-12 construction
projects. Healthcare construction is expected to remain flat, given continued
emphasis on cost containment.
- Public works construction will drop
5%, pulling back after a 3% gain in 2013 that was lifted by the start of
several large highway and bridge projects. More focus on deficit
reduction will limit federal support for environmental public works, although
the improved fiscal position of state and local governments will help to
cushion the extent of the public works decline.
- Electric utility construction will
retreat 33%, continuing the 55% correction estimated for 2013 that followed the
current dollar high reached in 2012. Capacity utilization is down
sharply, limiting the near term need for new generating capacity. The need for
transmission line work remains strong.
“The 2014 picture bears some similarity to what’s taking place during
2013, with single family housing providing much of the upward push; multifamily
housing showing a slower yet still healthy rate of growth after four years of
expansion, and commercial building gradually ascending from low levels,” added
Murray. “One change that’s expected for 2014 is that institutional
building will no longer be pulling down nonresidential building and total
construction.”
The 2014 Dodge Construction Outlook was presented at McGraw
Hill Construction’s 75th annual Outlook Executive Conference in Washington,
D.C. Copies of the report with additional details by building sector can
be ordered at http://analyticsstore.construction.com/2014-dodge-construction-outlook?sourcekey=PRESREL.
Additional reports and projections are available from McGraw Hill Construction
Research and Analytics, http://construction.com/market_research.
Source: Construction.com
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