Dodge Data & Analytics today released its 2017 Dodge Construction Outlook. The report predicts that total U.S. construction starts for 2017 will advance 5% to $713 billion, following gains of 11% in 2015 and an estimated 1% in 2016.
“The U.S. construction industry has witnessed signs of deceleration in 2016, following several years of steady growth,” says Robert Murray, chief economist for Dodge Data & Analytics. “Total construction starts during the first half of this year lagged behind what was reported in 2015, raising some concern that the current construction expansion may have run its course. However, the early 2016 shortfall reflected the comparison to unusually elevated activity during the first half of 2015, lifted by 13 very large projects valued each at $1 billion or more, such as a $9 billion liquefied natural gas export terminal in Texas and a $2.5 billion office tower in New York City. As 2016 has proceeded, the year-to-date shortfall has grown smaller, easing concern that the construction industry may be in the early stage of cyclical decline. Instead, the construction industry has now entered a more mature phase of its expansion, one that is characterized by slower rates of growth than what took place during the 2012-2015 period, but still growth. Since the construction start statistics will lead the pattern of construction spending, this means that construction spending can be expected to see moderate gains through 2017 and beyond.
“On balance, there are a number of positive factors which suggest the construction expansion has room to proceed. The U.S. economy in 2017 is anticipated to see moderate job growth, market fundamentals for commercial real estate should remain generally healthy, and more funding support is coming from state and local bond measures. Although the global economy in 2017 will remain sluggish, energy prices appear to have stabilized, interest rate hikes will be gradual and few, and a new U.S. President will have been elected. For 2017, total construction starts are forecast to rise 5% to $713 billion. Gains of 8% are expected for both residential building and nonresidential building, while nonbuilding construction slides a further 3%.”
The pattern of construction starts by more specific sectors is the following:
- Single family housing will rise 12% in dollars, corresponding to a 9% increase in units to 795,000 (Dodge basis). Access to home mortgage loans is improving, and some of the caution exercised by potential homebuyers will ease with continued employment growth and low mortgage rates. Older members of the Millennial generation are now moving into the 30 to 35 year-old age bracket, which should begin to lift demand for single family housing.
- Multifamily housing will be flat in dollars and down 2% in units to 435,000 (Dodge basis). This project type now appears to have peaked in 2015, lifted in particular by an exceptional amount of activity in the New York NY metropolitan area, which is now settling back. Continued growth for multifamily housing in other metropolitan areas, along with still generally healthy market fundamentals, will enable the retreat at the national level to stay gradual.
- Commercial building will increase 6% on top of the 12% gain estimated for 2016. Office construction is showing improvement from very low levels, lifted by the start of several signature office towers and broad development efforts in downtown markets. Store construction should show some improvement from a very subdued 2016, and warehouses will register further growth. Hotel construction, while still healthy, will begin to retreat after a strong 2016.
- Institutional building will advance 10%, resuming its expansion after pausing in 2015 and 2016. The educational facilities category is seeing an increasing amount of K-12 school construction, supported by the passage of recent school construction bond measures. More growth is expected for the amusement category (convention centers, sports arenas, casinos) and transportation terminals.
- Manufacturing plant construction will increase 6%, beginning to recover after steep declines in 2015 and 2016 that reflected the pullback for large petrochemical plant starts.
- Public works construction will improve 6%, regaining upward momentum after slipping 3% in 2016. Highways and bridges will derive support from the new federal transportation bill, while environmental works should benefit from the expected passage of the Water Resources Development Act. Natural gas and oil pipeline projects are expected to stay close to the volume that’s been present in 2016.
- Electric utilities and gas plants will fall another 29% after the 26% decline in 2016. The lift that had been present in 2015 from new liquefied natural gas export terminals continues to dissipate. Power plant construction, which was supported in 2016 by the extension of investment tax credits, will ease back as new generating capacity comes on line.
The 2017 Dodge Construction Outlook was presented at the 78th annual Outlook Executive Conference held by Dodge Data & Analytics at the Gaylord National Resort and Convention Center in National Harbor, MD. Copies of the report with additional details by building sector can be ordered here or by calling (800) 591-4462.
Related Stories
Contractors | Oct 19, 2023
Crane Index indicates slowing private-sector construction
Private-sector construction in major North American cities is slowing, according to the latest RLB Crane Index. The number of tower cranes in use declined 10% since the first quarter of 2023. The index, compiled by consulting firm Rider Levett Bucknall (RLB), found that only two of 14 cities—Boston and Toronto—saw increased crane counts.
Market Data | Oct 2, 2023
Nonresidential construction spending rises 0.4% in August 2023, led by manufacturing and public works sectors
National nonresidential construction spending increased 0.4% in August, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.09 trillion.
Giants 400 | Sep 28, 2023
Top 100 University Building Construction Firms for 2023
Turner Construction, Whiting-Turner Contracting Co., STO Building Group, Suffolk Construction, and Skanska USA top BD+C's ranking of the nation's largest university sector contractors and construction management firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking includes revenue for all university/college-related buildings except student residence halls, sports/recreation facilities, laboratories, S+T-related buildings, parking facilities, and performing arts centers (revenue for those buildings are reported in their respective Giants 400 ranking).
Construction Costs | Sep 28, 2023
U.S. construction market moves toward building material price stabilization
The newly released Quarterly Construction Cost Insights Report for Q3 2023 from Gordian reveals material costs remain high compared to prior years, but there is a move towards price stabilization for building and construction materials after years of significant fluctuations. In this report, top industry experts from Gordian, as well as from Gilbane, McCarthy Building Companies, and DPR Construction weigh in on the overall trends seen for construction material costs, and offer innovative solutions to navigate this terrain.
Data Centers | Sep 21, 2023
North American data center construction rises 25% to record high in first half of 2023, driven by growth of artificial intelligence
CBRE’s latest North American Data Center Trends Report found there is 2,287.6 megawatts (MW) of data center supply currently under construction in primary markets, reaching a new all-time high with more than 70% already preleased.
Contractors | Sep 12, 2023
The average U.S. contractor has 9.2 months worth of construction work in the pipeline, as of August 2023
Associated Builders and Contractors' Construction Backlog Indicator declined to 9.2 months in August, down 0.1 month, according to an ABC member survey conducted from Aug. 21 to Sept. 6. The reading is 0.5 months above the August 2022 level.
Contractors | Sep 11, 2023
Construction industry skills shortage is contributing to project delays
Relatively few candidates looking for work in the construction industry have the necessary skills to do the job well, according to a survey of construction industry managers by the Associated General Contractors of America (AGC) and Autodesk.
Market Data | Sep 6, 2023
Far slower construction activity forecast in JLL’s Midyear update
The good news is that market data indicate total construction costs are leveling off.
Giants 400 | Sep 5, 2023
Top 80 Construction Management Firms for 2023
Alfa Tech, CBRE Group, Skyline Construction, Hill International, and JLL top the rankings of the nation's largest construction management (as agent) and program/project management firms for nonresidential buildings and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Sep 5, 2023
Top 150 Contractors for 2023
Turner Construction, STO Building Group, DPR Construction, Whiting-Turner Contracting Co., and Clark Group head the ranking of the nation's largest general contractors, CM at risk firms, and design-builders for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2023 Giants 400 Report.