Source: Dodge Data & Analytics, New York City
The 2015 Dodge Construction Outlook, a mainstay in industry forecasting and business planning, projects U.S. residential, nonresidential and nonbuilding work climbing to $612 billion next year, up from the $564 billion estimated for 2014 and high by recent historical standards.
“The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years,” says Dodge Data & Analytics Chief Economist Robert Murray. “The economic environment going forward carries several positives that will help to further lift total construction starts.
“Financing for projects is becoming more available, reflecting some easing of bank lending standards, a greater focus on real estate development by the investment community, and more construction bond measures getting passed. While federal funding for construction programs is still constrained, states are now picking up some of the slack. Interest rates for the near term should stay low, and market fundamentals for commercial building and multifamily housing continue to strengthen.”
By sector, the 2015 Dodge Construction Outlook finds:
- Commercial building will increase 15 percent, slightly faster than the 14 percent gain estimated for 2014. Office construction has assumed a leading role in the sector upturn, aided by expanding private development as well as healthy contract activity related to technology and finance firms. Hotel and warehouse work should also strengthen, although the pickup for stores is more tenuous.
- Institutional building will advance 9 percent, continuing the moderate upward trend established this year. The education category is now seeing an increasing amount of K-12 school contracts, augmented by passage of recent construction bond measures. Healthcare facilities are expected to show some improvement relative to diminished 2014 activity.
- Single-family housing will rise 15 percent in dollars, corresponding to an 11 percent increase in units to 700,000 (Dodge basis). Access to home mortgage loans is projected to expand, lifting housing demand, although the millennial generation’s gradual shift towards homeownership limits the potential number of new homebuyers in the near term.
- Multifamily housing will increase 9 percent in dollars and 7 percent in units to 405,000 (Dodge basis). Occupancies and rent growth continue to be supportive, although the rate of increase for construction is now decelerating as the sector matures.
- Public works construction will improve 5 percent, a partial rebound following the 9 percent decline estimated for 2014. Highway and bridge volume should stabilize, and modest gains are anticipated for environmental public works. Federal spending restraint will be offset by states’ greater financing role, owing to higher user fees and increased use of public-private partnerships.
- Electric utilities will slide 9 percent, continuing a downward trend that followed an exceptional volume of construction starts reported for 2011-2012. With more projects now coming on line, capacity utilization rates will stay low, limiting the need for new construction.
- Manufacturing plant construction will settle back 16 percent, following the huge increases reported during both 2013 (+42 percent) and 2014 (+57 percent) that reflected the start of massive chemical and energy-related projects.
Dodge Data & Analytics presented the forecast at the 76th annual Outlook Executive Conference in Washington, D.C. Copies of the report with additional details by building sector can be ordered here.