CINCINNATI—US construction starts are expected to grow at a slower pace in 2018, moderating to 3% although forecast to grow annually at nearly 5% over the following four years, construction data firm ConstructConnect says in its Spring 2018 forecast. That's due partially to a normalization from several mega-projects started at the end of 2017.
The forecast is presented against a macroeconomic backdrop that includes a forecast of GDP growing to 2.8% this year from 2.3% in '17, as well as the advent of the new tax package and improving global trade.
A major factor in spending this year is expected to be infrastructure upgrades; the Trump administration reportedly will announce its scaled-down plan for public/private partnerships this coming week. “Nobody doubts the urgent need for upgrades to the nation's public works inventory,” says ConstructConnect chief economist Alex Carrick. “Recognizing that states and municipalities are taking the lead with infrastructure, we are forecasting increases of 6.9% for road starts and 9.0% for bridge starts in 2018.”
However, the report says the biggest driver will be residential construction, albeit more on the single-family side than in multifamily. Single-family homebuilding is expected to grow by 9.2% this year, pulling ahead of apartment starts, which will be essentially flat at 0.1% year-over-growth. Total residential starts will rise by an average annual increase of 7.0% out to 2022.
“There are several reasons for this, but most centrally, US homebuilding is supported by strong catch-up forces after the precipitate fall in homebuilding following the financial crisis,” the report states. It notes that the supply of homes for sale contracted by 7.8% Y-O-Y in the third quarter, while existing home sales declined by 3.6% in December.
“Tight inventories of homes are impacting on house prices with the Case-Shiller home price index accelerating to 6.2% in October,” according to the report. “This should translate into ongoing demand for new home construction.”
Conversely, non-residential starts will decline by 1.6% this year—again, due mainly to normalization from major project initiatives that got underway last year. Total non-residential building starts are predicted to average +2.0% annually from 2019 to '22.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
