Dodge Outlook Report predicts modest growth

McGraw-Hill ConstructionMcGraw-Hill’s 2013 Dodge Construction Outlook predicts that total U.S. construction starts for 2013 will rise 6% to $483.7 billion, slightly higher than the 5% increase to $458 billion estimated for 2012. Based on significant research and in-depth analysis of macro-trends, the 2013 Dodge Construction Outlook details the forecasts for each construction sector:

  • Single family housing will grow 24% in dollars, corresponding to a 21% increase in units to 615,000 (McGraw-Hill Construction basis). The positives for single family housing have become more numerous – the pace of foreclosures has eased, home prices are stabilizing, and mortgage rates are at record lows.
  • Multifamily housing will rise 16% in dollars and 14% in units, marking healthy percentage gains yet slower growth than what took place during 2011 and 2012. Improved market fundamentals will help to justify new construction, and this structure type continues to be viewed favorably by the real estate finance community.
  • Commercial building will increase 12%, a slightly faster pace than the 5% gain estimated for 2012. Both warehouses and hotels will benefit from lower vacancy rates, while store construction will feature more upgrades to existing space and the derived lift coming from gains for single family housing. The increase for office construction will be modest, as new privately financed projects continue to be scrutinized carefully by lenders. Next year’s level of commercial building in current dollars will still be more than 40% below the 2007 peak.
  • Institutional building will level off, following the steep 13% drop estimated for 2012. For educational facilities, K-12 construction will slip further while college and university construction should at least stabilize. Healthcare facilities are expected to make a modest rebound after this year’s downturn.
  • The manufacturing building category will grow 8%, showing improvement after its 2012 decline.
  • Public works construction will slide an additional 1%, as federal spending cuts in particular restrain environmental projects. The new two-year federal transportation bill should help to limit the impact of spending cuts on highways and bridges.
  • Electric utility construction will drop 31%, after reaching a record high in current dollars during 2012. This year was boosted by the start of two very large nuclear power plants, and projects of similar magnitude are not expected for 2013. The expiration of federal loan guarantees for renewable energy projects would also dampen construction in 2013.

The 2013 Dodge Construction Outlook was presented at McGraw-Hill Construction’s 74th annual Outlook Executive Conference in Washington, D.C. Copies of the report with additional details by building sector can be ordered online.