Mixed Forecast for Construction in 2017

Overall growth expected, with slowing in multifamily and institutional
Compiled by Katy Devlin
January 16, 2017

Construction starts will continue to grow in many, but not all, construction segments in 2017, according to the Institute for Trend Research Trends 10 Report, which looks at major benchmarks of microeconomic activity, including construction. Commercial construction is poised for increased year-over-year growth, while institutional and multifamily construction will begin to slow, according to the report.

Click image to view/download a larger version

The ITR report charts the location of various economic segments on the business cycle curve. Benchmarks in Phase A are at the early stages of recovery; those in Phase B are above year-ago levels; those in Phase C are still above year-ago levels, but the rate of growth has slowed; and those in Phase D are in recession, or below year-ago levels.

According to the report, many benchmarks of the U.S. economy are in a phase of accelerating growth, which points to overall growth in construction. “With financial, medical and consumer prices all in Phase B, and retail and housing transitioning to accelerating growth imminently, many sectors of the U.S. economy are in sync and will drive cyclical rise in many contracting segments in 2017,” according to ITR officials.

Leading this growth in construction will be office and private mall construction, which are currently in Phase B of the business cycle, defined by accelerating growth. “The industry should look for these areas for opportunities in 2017, as both segments will generally grow during this time period,” according to ITR officials.

Retail and housing will also grow in 2017, albeit at a slower pace initially. The segments are currently in Phase C, but are expected to experience a soft landing before transitioning directly into Phase B and back into faster growth. “Activity in these segments will begin to accelerate in 2017, driven by the strength of the consumer,” according to ITR officials.

ITR officials note that growth in the residential segment will be driven by single-family starts. The multi-family segment is expected to decelerate, with construction starts slowing during the year. Unlike retail and single-family construction, the segment is headed toward a hard landing. “Multi-family housing starts will transition to Phase D imminently. Single-family housing starts will outperform the multi-family counterpart in this cycle, as no year-over-year contraction is expected,” according to ITR officials.

Institutional construction is also expected to slow in 2017, at least during the early months of the year. Education and healthcare construction are currently in Phase C, a period of slowing growth. “Deceleration will persist into early 2017, before growth accelerates for the rest of the year,” according to ITR officials.