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ConstructConnect Lowers 2016 Starts Forecast, Raises 2017 Prediction


In ConstructConnect's fourth-quarter forecast, it has dropped its 2016 year-over-year total construction starts projection, but raised its 2017 starts prediction, both compared to its third-quarter analysis.

ConstructConnect has lowered its fourth-quarter year-over-year projection of 2016 total construction starts to 6.2 percent from 7.9 percent, compared to its third-quarter forecast. The downward revision was due in part to weaker than expected new residential construction.

The firm crunches construction industry data and supplies that information to general contractors, subcontractors, building product manufacturers, designers, architects, and project owners, among others.

However, its 2017 fourth-quarter forecast on construction starts has been increased to 6.8 percent from 6.2 percent, also versus its third-quarter version.

ConstructConnect says nonresidential construction will continue to benefit from four trends: Ongoing shortages in office space; an aging population that will drive health care needs; new and repair work on essential infrastructure; and a gradual firming of energy prices that will lead to more engineering and civil investment.

Nonresidential construction starts so far in 2016 have been better than expected, led by strength in the categories of private office buildings, parking garages, and hospital and other health care structures. But residential starts have been weaker this year than anticipated.

"And while U.S. economic growth is maintaining forward momentum, the pace is slower than in previous expansions, and the prolonged length of the upturn is creating worry about how much longer it can be sustained," said Alex Carrick, ConstructConnect's chief economist.

Rising incomes, low mortgage rates and plenty of pent-up demand will continue to support homebuilding, Carrick said. Single-family starts are forecast to grow at roughly twice the pace of multifamily starts over much of the forecast period out to 2020.

Nonresidential starts in 2016 will be stronger than what ConstructConnect projected in the third quarter, 6.6 percent compared with 5.3 percent. The annual volume of commercial and institutional starts this year will be almost the same, at slightly over $100 billion each. This year has been a challenging year for industrial starts (-25.7% year-over-year), but 2017 will see improvement (+11.1%). And 2018 should also be quite respectable at 6.2 percent growth in nonresidential starts, Carrick said.

Dodge Data Predicts Starts Growth of 5 Percent in 2017
Total construction starts in the nation are forecast to rise 5 percent next year, with the residential sector climbing 8 percent, Dodge Data and Analytics said its 2017 Dodge Construction Outlook.

Single-family housing will rise 12 percent in dollars, corresponding to a 9 percent increase in units to 795,000, according to Dodge Data's forecast.

"Access to home mortgage loans is improving, and some of the caution exercised by potential homebuyers will ease with continued employment growth and low mortgage rates," said Robert Murray, chief economist for Dodge Data and Analytics. "Older members of the Millennial generation are now moving into the 30-to-35-year-old age bracket, which should begin to lift demand for single family housing."

Multifamily housing will be flat in dollars and down 2 percent in units to 435,000, Dodge Data said in its annual report.

"This project type now appears to have peaked in 2015, lifted in particular by an exceptional amount of activity in the New York City metropolitan area, which is now settling back," Murray said. "Continued growth for multifamily housing in other metropolitan areas, along with still generally healthy market fundamentals, will enable the retreat at the national level to stay gradual."

Dodge's report predicts that total U.S. construction starts for 2017 will advance 5 percent to $713 billion, following gains of 11 percent in 2015 and an estimated 1 percent in 2016.

Commercial building is expected to increase 6 percent on top of the 12 percent gain estimated for 2016.

Institutional building should advance 10 percent.

Manufacturing plant construction is anticipated to grow 6 percent.

Public works construction should improve 6 percent.

Electric utilities and gas plants is predicted to fall 29 percent after a 26 percent decline in 2016.

"On balance, there are a number of positive factors which suggest the construction expansion has room to proceed," Murray said. "The U.S. economy in 2017 is anticipated to see moderate job growth, market fundamentals for commercial real estate should remain generally healthy, and more funding support is coming from state and local bond measures.

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October 13, 2019, 6:43 pm PDT

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