Dodge’s 2020 Outlook Predicts Decline in Construction Starts

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Dodge Data & Analytics released its 2020 Dodge Construction Outlook, reporting that U.S. construction starts will slip to $776 billion in 2020, a decline of 4% from 2019’s estimated level of activity.

“The recovery in construction starts that began during 2010 in the aftermath of the Great Recession is coming to an end,” said Richard Branch, chief economist for Dodge Data & Analytics. “Easing economic growth driven by mounting trade tensions and lack of skilled labor will lead to a broad based, but orderly pullback in construction starts in 2020. After increasing 3% in 2018, construction starts dipped an estimated 1% in 2019 and will fall 4% in 2020.”

However, according to Branch, 2020 will not be a repeat of what the construction industry endured during the Great Recession. He said although construction starts will decline the level of activity is anticipated to remain close to recent highs.

By major construction sector, the dollar value of starts for residential buildings will be down 6%, while starts for both nonresidential buildings and nonbuilding construction will be down 3%.

In addition, the dollar value of single-family housing starts will be down 3% in 2020, and the number of units will also lose 5%, falling to 765,000.

Multifamily construction starts are expected to drop 13% in dollars and 15% in units to 410,000.

The dollar value of commercial building starts will pull back 6%, with the steepest declines occurring in commercial warehouses and hotels.

However, there is a bright spot. In 2020, institutional construction starts will remain about the same as 2019, as the influence of public dollars adds stability to the outlook. Specifically, education buildings and health facility starts should continue to see modest growth next year, offset by declines in recreation and transportation buildings.

The dollar value of manufacturing plant construction will slip 2% in 2020, following an estimated 29% decline in 2019. “Rising trade tensions have tilted this sector to the downside with recent data, both domestic and globally, suggesting the manufacturing sector is in construction,” the report said.

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