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Construction Update Sees Fits in Starts

Friday, August 16, 2013

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The fitful recovery of the new construction market continues, with strong growth projected for the housing sector, "modest gains" for commercial building and public works, and institutional building "in retreat," a midyear analysis shows.

New construction starts are forecast to rise 6 percent this year to $506 billion, according to the Midyear Update to the 2013 Construction Outlook from McGraw Hill Construction.

This is the same rate of increase for total construction starts that was predicted last October, following an 8 percent gain in 2012.

'Selective' Recovery

"The recovery for construction continues to unfold in a selective manner, proceeding against the backdrop of the sluggish U.S. economy," said Robert A. Murray, vice president of economic affairs for McGraw Hill Construction.

Housing
NAHB.org

The U.S. inventory of new homes for sale is low, which should spur more construction, and prices are heading up, according to McGraw Hill Construction.

Although the demand for housing "remains strong," Murray said, tight government financing is exerting "a dampening effect on both the economy and the construction industry.."

"On balance, the recovery for construction is making progress, but at a single-digit pace given the mix of pluses and minuses by major sector," he said.

Sector Breakdowns

These are McGraw Hill's snapshots and projections for 2013

Single family housing will advance 28 percent in dollars, bringing a 24 increase in the number of dwelling units to 64,000. The inventory of new homes for sale is currently very low, which should spur more construction, and home prices are heading up.

Multifamily housing will climb 23 percent in dollars and 20 percent in units, helped by the gains reported for occupancies and rents over the past year. Major metropolitan areas such as New York continue to see groundbreaking for large apartment projects, along with the re-emergence of large condominium projects.

Commercial building will grow 15 percent—an improvement over the 11 percent increase of 2012, but still 39 percent less than the 2007 peak year. The pace of store construction is picking up, joining earlier gains registered by warehouses and hotels. The increase for office construction will remain relatively subdued in 2013, McGraw Hill said.

Newton North HS
Wikimedia Commons

State and local budgets will continue to dampen school construction. Newton North High School (pictured), in Newton, MA, was built in 2009.

The institutional building market will slide an additional 5 percent, after falling 10 percent in 2012. State and local budgets remain tight, slowing school construction. And "uncertainty related to hospital mergers and the implementation of the Affordable Care Act is restraining construction of health-care facilities," McGraw Hill reported.

The manufacturing building category will drop 8 percent as firms hold back on plant investment given the sluggish U.S. economy and slow export markets.

Public works construction will rise 3 percent, helped by growth for highways and bridges. The transportation sector was largely exempt from the federal spending cutbacks under the sequester, and the current year is seeing a number of large bridge projects reach the construction start stage.

Electric utilities will see a 40 percent plunge in the value of new construction starts, following the record high of 2012, which included the start of two large nuclear facilities. With new generating facilities coming on line and capacity utilization rates dropping, the near term is seeing downward pressure on new power plant construction.

   

Tagged categories: Bridges; Building operations; Commercial Construction; Construction; Good Technical Practice; Health Care/Hospitals; Market forecasts; McGraw-Hill; Residential Construction; Roads/Highways; Schools

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