U.S. Construction Starts to Climb 3 Percent in 2018

Glass Magazine
November 13, 2017

Dodge Data & Analytics released its 2018 Dodge Construction Outlook. The report predicts that total U.S. construction starts for 2018 will climb 3 percent to $765 billion.

“The U.S. construction industry has moved into a mature stage of expansion. After rising 11 percent to 13 percent per year from 2012 through 2015, total construction starts advanced a more subdued 5 percent in 2016,” says Robert Murray, chief economist for Dodge Data & Analytics.

Murray cites several positive factors which suggest that the construction expansion has further room to proceed, saying, “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. Two areas of uncertainty relate to whether tax reform and a federal infrastructure program get passed, with their potential to lift investment. Overall, the year 2018 is likely to show some construction project types register gains while other project types settle back, with the end result being a 3 percent increase for total construction starts." Murray states that gains are predicted for nonresidential building, up 2 percent.

The pattern of construction starts by more specific segments indicates that multifamily housing will retreat 8 percent in dollars and 11 percent in units to 425,000 (Dodge basis). This project type appears to have peaked in 2016, helped by widespread growth across major metropolitan markets. That strength has begun to wane in 2017, given slight deterioration in market fundamentals (rent growth, occupancies) and a more cautious bank lending stance. Commercial building will increase 2 percent, following a 3 percent gain in 2017, and continuing to decelerate after the sharp 21 percent hike back in 2016. Office construction should see further growth in 2018, helped by broad development efforts in downtown markets, and warehouse construction is supported by greater demand arising from e-commerce. However, store construction will remain weak, and hotel construction will continue to pull back from its 2016 peak.

Order a copy of the report here.