The data has been gathered, tabulated, and analyzed by a number of different independent researchers and construction economists — and the news is good. Despite a number of economic and political factors taking their toll throughout the world, the groups we follow on a regular basis here at home remain upbeat in their 2016 construction forecasts. Most market segments remain on an upward trajectory or are expected to fall off only slightly from the solid numbers posted this year. Turn to the “2016 Construction Forecast” special report on page 18 for more details.
As noted in FMI’s 3rd Quarter “Construction Outlook Report,” analysts expect 6% growth in 2015 and another 7% next year — reaching a level of $1.09 trillion, the highest total since 2008 (unadjusted for inflation). This report notes the major driving force behind this year’s growth is the manufacturing sector, which posted an impressive 18% jump. Although the firm forecasts this pace will back down a bit in the next three years, it still predicts gains in the 5% to 7% range during this time frame. The other nonresidential market sectors that are posting solid numbers and should continue to do so in 2016 include: lodging (12%), commercial (10%), transportation (9%), amusement and recreation (8%), and office (7%). FMI also notes the residential sector will post gains of 10% this year. The momentum that’s been building in this sector will continue in 2016, as its forecast calls for another 9% rise next year.
As noted in the “2016 Dodge Construction Outlook Report,” total construction starts are estimated to rise 13% to $675 billion in 2015. This group notes that a good portion of this increase came from the electric utility and gas plant categories (a whopping 159% bump). In addition, the residential sector is providing a greater contribution to this current expansion as compared to last year (18%). Looking ahead to 2016, the numbers still look pretty strong in most categories. Dodge forecasts total construction starts to rise 6%, reaching a spending level of $712 billion. Individual market sector growth projections are as follows: single-family housing (20%), multifamily housing (7%), commercial buildings (11%), and institutional buildings (9%). However, its report does note a bit of a drop-off in the manufacturing buildings (-1%) and electric utilities/gas plants (-43%) categories. The big falloff in the second category is directly related to a pullback in the large petrochemical and new power plant sectors.
A quick look at the regional construction starts data in the Dodge report reveals a few interesting projections. Single-family starts should be strong in all regions — so should multifamily, with the exception of the Midwest. The commercial and manufacturing markets will be strongest in the Midwest and Atlantic regions next year. And the institutional and other category should post double-digit growth rates in the Northeast and South Atlantic regions. As you might expect, the South Central region will be hit the hardest in the nonbuilding construction category.
It appears the slow and steady growth of construction activity that’s taken place over the last several years has become a trend. This is the type of news we all like to hear as we move into another exciting and challenging year. I wish everyone out there a Happy New Year. May your business prosper and your personal life be filled with joy.
