Office, Multifamily Construction Expected to Drive Gains In 2016
Office, shopping center, warehouse and hotel construction will increase 11% in 2016, up from the 4% gain estimated for 2015, with office development resuming its historical role as the leader in the commercial building upturn, according to the newly released 2016 Dodge Construction Outlook. Multifamily construction dollar volume, meanwhile, is forecast to increase 7% on a 5% increase in built units to 480,000 -- somewhat slower than the gains in 2015, but still growth - with the ongoing development wave extended by low vacancies, rising rents and the demand for apartments from millennials, according to the report released by Dodge Data & Analytics. Leading growth in commercial building will be office, the segment’s historical driver, aided by a boost in private development and demand from technology and finance firms. Residential, including single-family homes, and nonresidential U.S. construction starts for 2016 will rise 6% to a total of $712 billion following gains of 9% in 2014 and an estimated 13% by the end of 2015. "Total construction activity, as measured by the construction starts data, is on track this year to record the strongest annual gain so far in the current expansion," said Robert Murray, chief economist for Dodge Data & Analytics. Murray added that much of this year’s lift has come from heavy industrial projects that started this year, including several massive liquefied natural gas terminals in the Gulf Coast region and new power plants. "On the plus side, the U.S. economy continues to register moderate job growth, lending standards are still easing, market fundamentals forcommercial real estate continue to improve, and more funding support is coming from state and local construction bond measures," Murray added. The continued strength of multifamily construction has driven total residential building, up 18% this year, with single-family resuming an upward trend after plateauing last year. Total nonresidential building has decelerated this year after surging 24% in 2014, and is now predicted to be flat to slightly down given a sharp pullback for new manufacturing plant starts and some loss of momentum by the commercial and institutional building segments, Murray said. Other sector predictions by Dodge include the following: * Institutional building will advance 9%, picking up the pace after the 6% rise in 2015. The educational facilities category is seeing an increasing amount of K-12 school construction, supported by the passage of recent school construction bond measures. * Manufacturing plant construction spending will recede an additional 1%, following the steep 28% plunge for 2015 that reflected the pullback by large petrochemical plant starts. * Though public works will be flat for 2015, activity from the new multiyear federal transportation bill expected to pass Congress by the first half of 2016 will begin show up in the numbers later in 2016 and into 2017.
