2018 Dodge New Construction Outlook Predicts 3 Percent Increase

Last week, Dodge Data & Analytics released its "2018 Dodge Construction Outlook" report, predicting total U.S. construction starts will climb 3 percent in 2018 to $765 billion. Breaking down each major sector, this mainstay of construction industry forecasting and business planning anticipates a 4 percent gain for residential building, a 2 percent gain for nonresidential building, and no change for nonbuilding construction.

"The U.S. construction industry has moved into a mature stage of expansion," said Robert Murray, chief economist for Dodge Data & Analytics. "After rising 11 percent to 12 percent per year from 2012 through 2015, total construction starts advanced a more subdued 5 percent in 2016."

In late 2016, the question was whether the construction industry had the potential for further growth in 2017. As it turned out, several project types, including multifamily housing and hotels, did pull back in 2017, but there was continued growth in single-family housing, office buildings and warehouses.

"In addition, the institutional segment of nonresidential building has been quite strong, led especially by transportation terminal projects in combination with gains for schools and healthcare facilities," Murray said. He estimated that total construction starts in 2017 would end up climbing 4 percent to $746 billion.

The report notes several positive factors, suggesting construction has further room for growth in 2018. One is that the U.S. economy is anticipated to see moderate job growth in 2018, and 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 in 2018 as in 2017, according to the report, funding support for 2018 construction is expected to come from state and local bond measures.

Overall, 2018 is likely to show some construction project types registering gains (residential building and nonresidential building), while other project types settle back (nonbuilding construction). Specific estimates include a 9 percent rise in single-family housing construction, but an 8 percent drop in multifamily housing construction; a 3 percent rise in institutional building construction, including an 11 percent rise in educational facilities construction; a 2 percent rise in commercial building construction, with growth in office construction and warehouse construction, but pullbacks in store construction and hotel construction; a 1 percent decline in manufacturing plant construction; and a 13 percent drop in electric utility and gas plant construction.

For the complete 2018 construction outlook, stay tuned for ELECTRICAL CONTRACTOR's January issue, which will break down this and other reports.

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