Report: Construction Industry To See Modest Growth in 2013

McGraw-Hill Construction today released its 2013 Dodge Construction Outlook. The report predicts that total U.S. construction starts for 2013 will rise 6 percent to $483.7 billion, slightly higher than the 5 percent increase to $458 billion estimated for 2012.

“As reported by McGraw-Hill Construction, new construction starts in 2010 edged up 2 percent, followed by another 1 percent gain in 2011, and 2012 is headed for a 5 percent increase to $458 billion. This still leaves the volume of total construction starts 32 percent below the 2005 peak on a current dollar basis, and down about 50 percent when viewed on a constant dollar basis,” said Robert Murray, McGraw-Hill Construction’s vice president of economic affairs. 

“The modest gains experienced during the past two years have in effect produced an extended bottom for construction starts, in which the process of recovery is being stretched out,” he says.

“The fiscal cliff poses a significant downside risk to the near-term prospects for the U.S. economy and the construction industry. Assuming that efforts to cushion the full extent of the fiscal cliff are successful next year, keeping the U.S. economy from sliding back into recession, then there are several positive factors to benefit construction, including low interest rates and improving market fundamentals for several project types,” Murray added.

Will the Construction Industry Be a Victim of the Fiscal Cliff?

Based on significant research and in-depth analysis of macro-trends, the 2013 Dodge Construction Outlook details the forecasts for each construction sector, as follows:

Single family housing will grow 24 percent in dollars, corresponding to a 21 percent 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 percent in dollars and 14 percent 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.

US Housing Starts Surge 15% in September to Four-Year High

Commercial building will increase 12 percent, a slightly faster pace than the 5 percent 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 percent below the 2007 peak.

Institutional building will level off following the steep 13 percent 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 percent, showing improvement after its 2012 decline.

Public works construction will slide an additional 1 percent, 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 percent 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.  Order copies of the report with additional details by building sector. Additional reports and projections are available from McGraw-Hill Construction Research and Analytics.

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