Dodge: More C/MF Construction Starts Next Year

Total U.S. construction starts for 2016 could rise by 6 percent to $712 billion, following an estimated 13 percent gain in 2015, said Dodge Data & Analytics, Washington, D.C.

“The expansion for the construction industry has been underway for several years now, with varying contributions from each of the major sectors,” said Robert Murray, chief economist for Dodge Data & Analytics. “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.”

Murray said nonresidential building decelerated this year after surging 24 percent in 2014. He predicted it will remain flat or fall slightly due to some loss of momentum by in the commercial and institutional building segments.

“For 2016, the economic environment should support further growth for the overall level of construction starts,” Murray said. “While short-term interest rates will be going up in 2016, given the expected rate hikes by the Federal Reserve, the increases in long-term interest rates should stay gradual. On the plus side, the U.S. economy continues to register moderate job growth, lending standards are still easing, market fundamentals for commercial real estate continue to improve and more funding support [for public projects] is coming from state and local construction bond measures.”

The Dodge 2016 Construction Outlook report said multifamily housing could increase by 7 percent in dollars and by 5 percent in units to 480,000 next year, slowing from this years’ gains. “Low vacancies, rising rents and the demand for apartments from Millennials will encourage more development,” the report said.

Commercial building should increase 11 percent in 2016, up from the 4 percent gain estimated for 2015. “Office construction will resume its leading role in the commercial building upturn, aided by more private development as well as construction activity related to technology and finance firms,” the report said.

Interestingly, single-family housing construction should rise 20 percent in dollars next year, which corresponds to a 17 percent increase in units to 805,000. “Access to home mortgage loans is improving, and some of the caution exercised by potential homebuyers will ease with continued employment growth,” the Dodge report said.