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Top construction economist sees minor drop in 2020 project activity

Source: Dodge Data & Analytics, New York 

The 2020 Dodge Construction Outlook, a mainstay in industry forecasting and business planning, projects total U.S. construction starts slipping 4 percent, to $776 billion, from this year to next.

“The recovery in construction starts that began during 2010 in the aftermath of the Great Recession is coming to an end,” says Dodge Chief Economist Richard Branch. “Easing economic growth driven by mounting trade tensions and lack of skilled labor will lead to a broad based, but orderly pullback in construction starts. After increasing 3 percent in 2018, construction starts dipped an estimated 1 percent in 2019.”

“Next year, however, will not be a repeat of what the construction industry endured during the Great Recession,” he affirms. “Economic growth is slowing but not anticipated to contract next year. Construction starts, therefore, will decline but the level of activity will remain close to recent highs. By major construction sector, the dollar value of starts for residential buildings will be down 6 percent, while starts for both nonresidential buildings and nonbuilding construction will drop 3 percent.”

By segment, he and the Dodge forecasting team see for 2020:

  • The number of single family housing starts dropping 5 percent, to 765,000, from 2019 trend levels. Affordability issues and the tight supply of entry level properties have kept demand for homes muted and buyers on the sidelines.
  • Multifamily construction starts off 13 percent in dollars and 15 percent in units, to 410,000, versus the 2019 level. The multifamily home segment was an early leader in the recovery, stringing together eight years of growth since 2009, but has seen vacancy rates move sideways over the past year.
  • The dollar value of commercial building starts retreating 6 percent, with the steepest declines in commercial warehouses and hotels, and high value data center construction activity offsetting overall office construction decline. 
  • Institutional construction matching 2019 levels as the influence of public dollars adds stability to the outlook. Education building and health facility starts should continue to see modest growth, offset by declines in recreation and transportation buildings.
  • The dollar value of manufacturing plant construction will slip 2 percent in 2020 following this year’s estimated 29 percent decline. Rising trade tensions have tilted this sector to the downside with recent data, both domestic and globally, suggesting contraction.
  • Public works construction starts moving 4 percent higher with growth continuing across all project types. By and large, recent federal appropriations have kept public works project funding either steady or slightly higher—translating into continued growth in environmental and transportation infrastructure starts.

The 2020 projections were released at the 81st annual Outlook Construction Conference, staged this year in Chicago. Copies of Chief Economist Branch’s full report, with additional details by building and nonbuilding sector, can be ordered here or from Dodge Data & Analytics, 800/591-4462; www.construction.com

 

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