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.

Better green metrics needed, says McGraw-Hill

McGraw-Hill ConstructionMcGraw-Hill Construction recently released its latest SmartMarket Executive Brief: Determining the Value of Green Building Investments: A Perspective From Industry Leaders on Triple Bottom Line Decision Making, in partnership with URS, at the White House’s 2012 GreenGov Symposium. The report provides the findings of qualitative research conducted by McGraw-Hill Construction through interviews with sustainability leaders in the education, healthcare, retail, manufacturing and federal government sectors on their perspectives about decision making for green building investments.

The report reveals that in order for green building to continue to gain market share at a comparable rate to the past decade, more far-reaching benefits need to be documented and demonstrated to organizational leadership for them to increase their level of green investments. These include benefits across the spectrum of financial, environmental and social benefits—often referred to as the “triple bottom line.”

The study includes recommendations on actions needed in the industry in order to accelerate green investments across the built environment:

  • Evaluate social, environmental and financial goals together when making decisions on green building investments;
  • Create green building benchmarks through standardization and disclosure of operational building costs;
  • Compile data and case studies that establish the value of nonfinancial benefits of green building;
  • Create better tools using a more thorough, industry-consensus definition of lifecycle costing based on impacts across the triple bottom line;
  • Assemble a public database of green project measures across the triple bottom line.

Through in-depth interviews with sustainability leaders, the report finds that organizations are using lifecycle cost analysis of operational savings to demonstrate the ROI of green and to justify green building projects. However, most respondents report there is a need for more data about the non-financial benefits of green to encourage their organizations to increase their investment in green building. This report also reveals the need for standardized measures that can fully capture the impact of green building across the triple bottom line.

McGraw-Hill Says New Construction Starts to Rise 2% in 2012

McGraw-Hill ConstructionMcGraw-Hill Construction today released its 2012 Dodge Construction Outlook Midyear Update projections, which revise the forecasts provided last October at the firm’s annual Outlook Conference in Washington DC. The Outlook Midyear Update predicts that total construction starts for the U.S. will increase 2% this year to $445 billion, up from the $434 billion reported for 2011. While slightly better than the flat performance for 2012 construction starts predicted last fall, the updated forecast still portrays an industry struggling to gain upward momentum.

The report notes:

  • Commercial building in 2012 will grow 10%, following the 12% gain in 2011. Warehouses and hotels will see the largest percentage increases, joined this year by a moderate gain for stores while office construction sees more privately financed projects but less government office buildings.
  • The institutional building market in 2012 will fall an additional 10%, after sliding 11% in 2011. The tough fiscal environment for states and localities continues to dampen school construction, and the uncertain economic environment is restraining healthcare facilities.

Commercial building to grow in 2012, but overall, industry will remain flat

McGraw-Hill ConstructionMcGraw-Hill Construction, part of The McGraw-Hill Companies recently released its 2012 Dodge Construction Outlook. The report predicts that overall U.S. construction starts for next year will remain essentially flat. The level of construction starts in 2012 is expected to be $412 billion, following the 4% decline to $410 billion predicted for 2011.

Based on significant research and in-depth analysis of macro-trends, the 2012 Dodge Construction Outlook details the forecasts for each construction sector, as follows:

  • Commercial building will grow 8%. Warehouses and hotels will see the largest percentage increases, but improvement for offices and stores will be modest.
  • Single family housing in 2012 will improve 10% in dollars, corresponding to a 7% increase in the number of units to 435,000 (McGraw-Hill Construction Dodge basis). This is still a low amount, as the excess supply of homes due to foreclosures continues to depress the market.
  • Multifamily housing will rise 18% in dollars and 17% in units, continuing its moderate, upward trend.
  • The institutional building market will slip an additional 2% in 2012, after falling 15% in 2011. The tough fiscal environment for states and localities will continue to dampen school construction, and the uncertain economic environment will limit growth in healthcare facilities.
  • Manufacturing buildings will increase 4%, following the 35% gain in 2011, as the low value of the U.S. dollar continues to support export growth.
  • Public works construction will drop a further 5%, after a 16% decline in 2011, due to spending cuts and the absence of a multiyear federal transportation bill for highway and bridge construction.
  • Electric utilities will retreat 24%, following a 48% jump in 2011.

Robert Murray, McGraw-Hill Construction’s Vice President of Economic Affairs, speaks about the report on YouTube.

June Construction Jumps 15%

New construction starts in June climbed 15% to a seasonally adjusted annual rate of $436.8 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  The gain followed particularly weak activity in May, and helped the pace of contracting during this year’s second quarter stay close to its first quarter level.  June featured a substantial increase for the nonbuilding construction sector, led by the start of several large electric utility projects.  Nonresidential building also registered improvement in June, while housing edged up slightly.  During the first six months of 2011, total construction starts on an unadjusted basis came in at $198.2 billion, down 7% from the same period a year ago.

The June data lifted the Dodge Index to 92 (2000=100), which is the highest reading so far in 2011.  During the first five months of 2011, the Dodge Index had trended downward, moving from 91 in January to 80 in May.  “The pattern of construction starts during the early months of 2011 showed a loss of momentum, due largely to renewed weakness for single family housing combined with a pullback for public works and institutional building,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “June’s gain enables the average for this year’s second quarter to be down a modest 2% from the first quarter, a milder slowdown than what was being suggested by the data through May.  The overall level of construction continues to be weak, but June’s gain is consistent with the sense that construction activity is hovering at a low level, rather than seeing further sustained declines.”