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Report Predicts Solid 2020

Caused by Economic Slowdown

Although total construction starts will see a year-to-year falling off, according to Dodge Data & Analytics, the amount will still be close to recent high amounts.

Dodge Data & Analytics recently released its 2020 Construction Outlook, which they assert is a mainstay in construction industry forecasting and business planning. The report forecasts that total U.S. construction starts will decline next year by 4% compared to this year'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," stated Richard Branch, chief economist for the provider of analytics for the construction industry. "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."

He adds however, "Next year, however, will not be a repeat of what the construction industry endured during the Great Recession. Economic growth is slowing but is not anticipated to contract next year. Construction starts, therefore, will decline but the level of activity will 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 drop 3%."
Presented at the 81st annual Outlook Executive Conference held by Dodge Data & Analytics at the Renaissance Chicago Downtown Hotel in Chicago, the report included these predictions for these specific segments:
aEUR? The dollar value of single-family housing starts will be down 3% in 2020 and the number of units will also lose 5% to 765,000 (Dodge basis). Affordability issues and the tight supply of entry level homes have kept demand for homes muted and buyers on the sidelines.
aEUR? Multifamily construction was an early leader in the recovery, stringing together eight years of growth since 2009. However, multifamily vacancy rates have moved sideways over the past year, suggesting that slower economic growth will weigh on the market in 2020. Multifamily starts are slated to drop 13% in dollars and 15% in units to 410,000 (Dodge basis).
aEUR? The dollar value of commercial building starts will retreat 6% in 2020. The steepest declines will occur in commercial warehouses and hotels, while the decline in office construction will be cushioned by high value data center construction. Retail activity will also fall in 2020, a continuation of a trend brought about by systemic changes in the industry.
aEUR? In 2020, institutional construction starts will essentially remain even with the 2019 level as the influence of public dollars adds stability to the outlook. Education building and health facility starts should continue to see modest growth next year, offset by declines in recreation and transportation buildings.
aEUR? Public works construction starts will move 4% higher in 2020 with growth continuing across all project types. By and large, recent federal appropriations have kept funding for public works construction either steady or slightly higher - translating into continued growth in environmental and transportation infrastructure starts.


January 18, 2020, 5:34 am PDT

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