In the recently released 2018 Dodge Construction Outlook, Dodge Data & Analytics predicts total U.S. construction starts will rise by 3% in dollar volume, to $765 billion, in 2018.
“The U.S. construction industry has moved into a mature stage of expansion,” says Robert Murray, chief economist for Dodge Data & Analytics. “After rising 11% to 13% per year from 2012 through 2015, total construction starts advanced a more subdued 5% 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.”
Single-family housing starts are expected to rise by 9% in dollar volume in 2018, corresponding with a 7% increase in units to 850,000. Dodge expects an increase in older millennial home buyers as employment growth continues, plus a slight boost from Hurricane Harvey and Irma rebuilding efforts.
In contrast, multifamily housing is expected to retreat by 8% in dollar volume and 11% in units, to 450,000, next year. Dodge notes that multifamily appears to have hit its peak in 2016 and has pulled back over the course of 2017, given a slight erosion of market fundamentals and a more cautious attitude among lenders.
Commercial building is expected to increase by 2% and institutional building by 3% in 2018, whereas manufacturing-plant construction will likely fall, by 1%. Public-works construction will improve, by 3%, and electric-utility construction will drop, by 13%.
“For 2018, there are several positive factors which suggest that the construction expansion has further room to proceed,” Murray continues. “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.”
