AKRONThe U.S. construction industry is expected to enjoy continued growth through 2015 after an ongoing recovery in 2014, according to market analysts.
Dodge Data & Analytics predicts that total U.S. construction starts for 2015 will rise 9 percent to $612 billion, a larger gain than the 5-percent increase to $564 billion estimated for 2014.
Likewise, the Associated Builders and Contractors (ABC) forecasts a steady and ongoing economic recovery for the U.S. commercial and industrial construction industries in 2015, with momentum especially growing in segments closely related to the current U.S. energy and industrial production resurgence.
The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years, said Robert Murray, chief economist and vice president for Dodge Data & Analytics.
The economic environment going forward carries several positives that will help to further lift total construction starts. Financing for construction projects is becoming more available, reflecting some easing of bank lending standards, a greater focus on real estate development by the investment community, and more construction bond measures getting passed.
While federal funding for construction programs is still constrained, states are now picking up some of the slack. Interest rates for the near term should stay low, and market fundamentals (occupancies and rents) for commercial building and multifamily housing continue to strengthen.
The research companyin its 2015 Dodge Construction Outlookpredicted:
c Commercial building will increase 15 percent, slightly faster than the 14-percent improvement estimated for 2014.
c Institutional building will grow 9 percent, continuing the moderate upward trend that was established during 2014.
c Single-family housing is predicted to increase 15 percent. It's expected that access to home mortgage loans will be expanded, lifting housing demand. However, the millennial generation is only gradually making the shift towards home ownership, limiting the potential number of new home buyers in the near term, according to Dodge Data.
c Public works construction will improve 5 percent, a partial rebound following the 9-percent decline estimated for 2014. Highway and bridge construction should stabilize, and modest gains are anticipated for environmental public works, according to Dodge Data. It predicted federal spending restraint will be offset by a greater financing role played by the states, involving higher user fees and the increased use of public-private partnerships.
ABC forecasts nonresidential construction spending will expand by roughly 7.5 percent next year, said ABC Chief Economist Anirban Basu. The segments that will experience the largest growth in construction spending in 2015 include power (e.g. natural gas-related construction), lodging (leisure and business spending), office space (professional services employment creation) and manufacturing (rebounding industrial production).
The public sector will see far more sluggish growth in construction spending. However, this fits a multi-year pattern with private nonresidential spen-ding exceeding public nonresidential spending by 28 percent in 2014, up from 15.6 percent in 2013, he said.
Taking into account current economic momentum, especially in the form of employment growth, ongoing accommodative monetary policy and increased growth in consumer spending, further stoked by falling gasoline prices, 2015 should be a decent one for the U.S. economy, Mr. Basu said. Contractors should continue to experience a lengthening backlog and the industry should continue to see increases in nonresidential construction spending and employment growth.
Meanwhile, FMI, a provider of management consulting and investment banking to the engineering and construction industry, pointed to the booming oil and gas industry in North America as driving growth in the industrial market, but noted that it could be draining talent and resources from other sectors.
Funding for needed heavy civil projects will continue to be challenging, it said, especially for many state and local governments. Capital expenditures are rising in some regions while lagging in others, according to FMI, but measurable movement is happening.