Sources: Dodge Data & Analytics, New York; CP staff
Total U.S. construction starts for 2018 will reach $765 billion, a 3 percent gain from this year’s projected level of $745 billion, according to Dodge Data & Analytics Chief Economist Robert Murray, who cites several positive factors suggesting the construction expansion that began in 2012 “has further room to proceed.”
“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,” he told attendees of the 2018 Dodge Outlook Conference, November 1-2 in Chicago. “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 percent increase for total construction starts. By major sector, gains are predicted for residential building, up 4 percent; and nonresidential building, up 2 percent; while nonbuilding construction stabilizes after two years of decline.”
“The industry has moved into a mature stage of expansion,” Murray noted. “After rising 11 percent to 13 percent per year from 2012 through 2015, total construction starts advanced a more subdued 5 percent 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.”
The 2018 Dodge forecast calls for year-over-year gains in key segments: Single-family housing, 850,000 starts, up 7 percent from 2017; multi-family housing, 425,000 starts, down 11 percent; commercial and institutional buildings, up 2 percent and 3 percent, respectively; and, public works construction, up 3 percent. The full 2018 Dodge Outlook Report can be obtained here.