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Will the US construction sector see a lift next year?

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As one of the world's largest economies, any market and economic trends of note in the US are closely followed around the world. So what is in store in the coming year for the US construction industry?

Property developers stateside will likely find Dodge Data & Analytics' 2015 Dodge Construction Outlook encouraging reading. The latest edition of the industry report suggests that a positive 2015 is lined up for the American construction sector, with a healthy level of growth and activity.

According to the outlook, the overall construction sector in the US will see "more balanced growth" next year, taking into account the forecasts for the individual sub-sectors. This will contribute to a 9 per cent increase in total construction starts in the US - reaching an estimated USD$612 billion in value.

This is substantially higher than that 5 per cent growth ($564 billion) that was forecast for 2014.

With Dodge Data & Analytics' report digging in depth into the specific pockets of US construction driving the growth, it's worthwhile taking a look at which areas of the industry are likely to stand out in 2015.

Commercial and single family construction leading the way

Dodge Data & Analytics revealed that of the numerous sub-sectors in the industry, commercial construction and single family housing will experience the strongest growth next year.

Commercial building is tipped to grow by 15 per cent - a greater pace than the 14 per cent that was initially estimated for this year. According to the report, growth in private development and strong construction demand from technology and finance firms have contributed to increases in office construction.

The outlook also expects hotel and warehouse construction to pick up next year.

The building of single family dwellings is also predicted to rise by 15 per cent in dollar value - accompanied by an 11 per cent increase in terms of units (700,000). While access to mortgages is predicted to increase and contribute to the growth, Dodge Data & Analytics notes that the crucial millennial generation is "only gradually making the shift towards homeownership". It could therefore be some time before we see a substantial pick-up in the volume of new home buyers.

Institutional building and multifamily housing also strong

Strong levels of demand from the education and healthcare sectors will also drive construction in these areas, the report outlines.

With a steady pipeline of K-12 schools and the healthcare facility sector expected to rebound from a slow 2014, institutional building is predicted to rise by 9 per cent, building on the "moderate upward trend" witnessed this year.

A similar level of growth has been tipped for the multifamily dwelling sector: a 9 per cent increase in dollars will be matched by a 7 per cent rise in units, reaching a total of 405,000 units. "Supportive" occupancy rates and rent growth have been earmarked as vital contributing factors to this trend.

Public works to "stabilise"

The report has also forecast growth of 5 per cent next year for the public works sector - however, this should be considered in light of the 9 per cent decline that was estimated in 2014. All in all, this should result in a "partial rebound" for the sub-sector.

According to Dodge Data & Analytics, highway and bridge construction and increasing environmental public works activity will drive this growth.

Expect a "more broad-based" year

Dodge Data & Analytics Chief Economist and Vice President, Robert Murray, pointed out some of the key factors that will contribute to these trends in 2015.

"The construction expansion should become more broad-based in 2015, with support coming from more sectors than was often the case in recent years. The economic environment going forward carries several positives that will help to further lift total construction starts," he outlined.

"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."

Combined with a strong outlook for the year and the availability of sophisticated property development software, the construction industry in the US has every reason to be optimistic in 2015. 

Date Published: 13 Nov 2014
Category: General News

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