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Will 2018 Show More Growth for Construction?

Paul DeffenbaughI know lots of economist jokes. I don’t know why, but it may be because I’ve attended so many construction industry forecast meetings, and economists like to open presentations by telling jokes about themselves.

Yesterday, Dodge Data and Analytics brought its well-regarding “Dodge Construction Outlook” conference to Chicago for the first time in its 79-year history. It was an excellent conference with several very valuable insights.

Before I get into a small report on the forecast, it bears mentioning that there was almost universal optimism about the long-term future of construction. It has been widely reported in the last years (including an editorial by yours truly) that productivity in the construction industry is lagging far behind other industries. The optimism comes from some very exciting new technologies and work strategies that will make construction more productive and efficient. Those improvements to our management style, working relationships and technical tools should improve profit margins and help solve the labor shortage.

After that big claim, let’s go to the forecast. You can see a press release with more data here.

Overall, Dodge predicts the industry will grow by about 4% in 2018 and 3% in 2019. That includes growth in almost all the construction sectors. Single-family housing (9%) will drive a lot of the increase, but other sectors will perform admirably. The two big hits that are preventing more growth are Multifamily Housing and Electrical Utilities & Gas Plants. In fact, the latter is predicted to perform so poorly (-31%) that if you back that out the overall industry will grow at 5% instead of 4%.

Few of those construction categories are overly important to our industry. For the metal construction industry, I would pull out these notable predictions.

    • Manufacturing Buildings up 27% in 2018
    • Commercial Buildings overall up 3% in 2018
    • Retail construction continues its decline with a predicted 16% drop in 2018 (Thank you, Amazon!) It’s amazing how much smaller retail projects have become over the years.
    • Warehouses, in contrast, will see significant growth (9%) in 2018 and (2%) in 2019. (Thank you, Amazon!)
    • Office starts will close 2017 with an 11%, which is actually off the bloom a bit from the 24% seen in 2016. For 2018, the growth will be a moderate 6%. Much of this is being driven by increasing vacancy rates in some major metro areas.
    • The hospitality industry has been thriving since its nadir in 2010, but recently has started cooling and looks to drop about 7% in starts in 2018
    • Institutional Buildings overall up 14% in 2018
    • Educational buildings market should grow about 9% in total square footage
    • Healthcare market will start to, but still be driven by some massive projects. In 2018, hospitals and other health facilities starts will drop about 1%, but the dollar amount will increase about 2%

So, what’s the definition of an economist? He’s an accountant who failed the humor test. I heard that one at a construction forecast conference years ago.

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