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Construction Surge Seen for 2015

Tuesday, December 16, 2014

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U.S. public-works projects will rebound and manufacturing plant construction will remain strong amid a generally robust year for construction starts, according to a major new industry forecast.

The 2015 Dodge Construction Outlook, from Dodge Data & Analytics (formerly McGraw Hill Construction) foresees a nine percent increase in overall construction starts to $612 billion, up from the five percent increase seen in 2014.

Better yet, every sector should share in the gains, the report said.

©iStock.com / DanCardiff

"Federal spending restraint will be offset by a greater financing role played by the states, involving higher user fees and the increased use of public-private partnerships," said Dodge.

"The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years," Dodge Data chief economist and vice president Robert Murray said in an announcement.

Industrial Construction Surge

Battered by a nine percent decline in 2014, public works construction is expected to bounce back with a five percent gain in 2015, according to the forecast. Highway and bridge construction are expected to stabilize, and environmental public works should see modest gains.

"Federal spending restraint will be offset by a greater financing role played by the states, involving higher user fees and the increased use of public-private partnerships," said Dodge.

Following huge increases in 2013 (up 42 percent) and 2014 (up 57 percent), manufacturing plant construction will "settle back" 16 percent, according to the forecast. The huge increases enjoyed by the last two years reflected the start of massive chemical- and energy-related projects.

Still, next year's volume "remains quite high by recent historical standards."

New starts in electric utilities, which enjoyed "exceptional volume" in 2011 and 2012, will likely decline in 2015 by nine percent.

Commercial, Institutional Gains

Commercial building should follow this year's 14 percent increase with a 15 percent gain in 2015. Office construction has had a big impact on the upturn, along with expanding private development and "healthy construction activity" related to technology and finance firms.

construction forecast
©iStock.com / kjohansen

Commercial and institutional building, as well as single- and multi-family housing, should all rise.

Hotel and warehouse construction is also expected to strengthen, "although the pickup for stores is more tenuous."

Institutional building should advance by nine percent, built partly on rising K-12 school construction aided by financing from recent bond measures. Healthcare facilities are expected to "show some improvement relative to diminished activity in 2014," Dodge said.

Single-family housing is expected to increase 15 percent in dollars, corresponding to an 11 percent increase in units to 700,000 (Dodge basis). Expansion of home mortgage lending should help, crimped in part by millennials' relative distinerest in homeownership.

Multifamily housing will increase by nine percent in dollars and seven percent in units to 405,000 (Dodge basis), but growth in that sector is slowing, Dodge reported.

Economic Drivers

"The economic environment going forward carries several positives that will help to further lift total construction starts," Murray said.

"Financing for construction projects is becoming more available, reflecting some easing of bank lending standards, a greater focus on real estate development by the investment community, and more construction bond measures getting passed.

"While federal funding for construction programs is still constrained, states are now picking up some of the slack. Interest rates for the near term should stay low, and market fundamentals (occupancies and rents) for commercial building and multifamily housing continue to strengthen."

   

Tagged categories: Bridges; Commercial Construction; Construction; Economy; Housing; Market forecasts; North America; Power Plants; Program/Project Management; Public Buildings; Roads/Highways; Utilities

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