Dodge Outlook Report Predicts Deceleration but Still Growth, Reflecting a Mixed Pattern by Project Type
CHICAGO – November 2, 2017 – Dodge Data & Analytics (https://www.construction.com/) today released its 2018 Dodge Construction Outlook, a mainstay in construction industry forecasting and business planning. The report predicts that total U.S. construction starts for 2018 will climb 3% to $765 billion.
“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.
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About Dodge Data & Analytics
: Dodge Data & Analytics is North America’s leading provider of analytics and software-based workflow integration solutions for the construction industry. Building product manufacturers, architects, engineers, contractors, and service providers leverage Dodge to identify and pursue unseen growth opportunities and execute on those opportunities for enhanced business performance. Whether it’s on a local, regional or national level, Dodge makes the hidden obvious, empowering its clients to better understand their markets, uncover key relationships, size growth opportunities, and pursue those opportunities with success. The company’s construction project information is the most comprehensive and verified in the industry. Dodge is leveraging its 100-year-old legacy of continuous innovation to help the industry meet the building challenges of the future. To learn more, visit www.construction.com.
Media Contact: Benjamin Gorelick | Spector & Associates +1-212-943-5858, ben@spectorpr.com
Source: Construction.com
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