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U.S. Construction Sees a Happy New Year

Wednesday, December 17, 2014

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If you build it in 2015, they will come—and live, learn, heal or work in it, according to a major new construction forecast that sees a $612 billion year ahead.

Residential, commercial, institutional, plant and public-works construction starts are all in for a positive year, according to the 2015 Dodge Construction Outlook, from Dodge Data & Analytics (formerly McGraw Hill Construction).

Every sector should share in the gains from a nine percent overall increase in construction starts, up from the five percent growth seen in 2014, the forecast said.

construction forecast
©iStock.com / kjohansen

Commercial and institutional building, as well as single- and multi-family housing, should all rise.

"The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years," Dodge Data chief economist and vice president Robert Murray said in an announcement.

Commercial, Residential Gains

Commercial building should follow this year's 14 percent increase with a 15 percent gain in 2015. Office construction has had a big impact on the upturn, along with expanding private development and "healthy construction activity" related to technology and finance firms.

construction forecast
©iStock.com / kjohansen

Commercial and institutional building, as well as single- and multi-family housing, should all rise.

Hotel and warehouse construction is also expected to strengthen, "although the pickup for stores is more tenuous," Dodge reported.

Institutional building should advance by nine percent, built partly on rising K-12 school construction aided by financing from recent bond measures. Health-care facilities are expected to "show some improvement relative to diminished activity in 2014," Dodge said.

Single-family housing is expected to increase by 15 percent in dollars, corresponding to an 11 percent increase in units to 700,000 (Dodge basis). Expansion of home mortgage lending should help, crimped in part by millennials' relative distinerest in homeownership.

Multifamily housing will increase by nine percent in dollars and seven percent in units to 405,000 (Dodge basis), but growth in that sector is slowing, Dodge reported.

Industrial Construction Surge

Battered by a nine percent decline in 2014, public works construction is expected to bounce back with a five percent gain in 2015, according to the forecast. Highway and bridge construction are expected to stabilize, and environmental public works should see modest gains.

©iStock.com / DanCardiff

"Federal spending restraint will be offset by a greater financing role played by the states, involving higher user fees and the increased use of public-private partnerships," said Dodge.

"Federal spending restraint will be offset by a greater financing role played by the states, involving higher user fees and the increased use of public-private partnerships," said Dodge.

Following huge increases in 2013 (up 42 percent) and 2014 (up 57 percent), manufacturing plant construction will "settle back" 16 percent, according to the forecast. The huge increases enjoyed by the last two years reflected the start of massive chemical- and energy-related projects.

Still, next year's volume "remains quite high by recent historical standards."

New starts in electric utilities, which enjoyed "exceptional volume" in 2011 and 2012, will likely decline in 2015 by nine percent.

Economic Drivers

"The economic environment going forward carries several positives that will help to further lift total construction starts," Murray said.

"Financing for construction 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 (occupancies and rents) for commercial building and multifamily housing continue to strengthen."

   

Tagged categories: Bridges; Commercial Construction; Construction; Economy; Housing; Market forecasts; Power Plants; Public Buildings; Roads/Highways; Utilities

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