Construction outlook 2018: Continued growth for state
At the Associated General Contractors of Colorado Breakfast with the Board and Associate/Supplier Showcase on Dec. 13, I presented findings from Dodge Data & Analytics’ Construction Outlook 2018 Report to an audience of nearly 300 construction industry professionals.
I have presented the Dodge Outlook, which is based on proprietary construction data gathered by Dodge, to AGC for the past 10 years. The intent is to provide insights on various construction industry sectors to help guide both general and specialty contractors for the upcoming year.
Year in review – construction in 2017. Overall, the U.S. construction industry has moved into a mature stage of expansion. After rising 11 percent to 13 percent per year from 2012 through 2015, total construction starts advanced a more subdued 5 percent in 2016. That deceleration has continued into 2017, with construction starts exhibiting an up-and-down pattern on a quarterly basis, often typical of a market that’s in the process of either approaching or rounding a peak.
However, Colorado remains one of the healthiest marketplaces in the country. This year was an extraordinary year in construction for Colorado, going from $18 billion in construction starts in 2016 to $21.6 billion in construction starts in 2017, which represents a 20 percent increase in construction starts.
Looking Ahead – construction in 2018. Total national construction starts in 2018 are forecast to advance 3 percent to $765.2 billion. Gains are predicted for residential building, up 4 percent; and nonresidential building, up 2 percent; while nonbuilding construction stabilizes after two years of decline.
Colorado is expected to experience a seven percent growth in construction starts in 2018, 4 percent higher than the national average. In addition, Colorado has more than doubled in terms of the amount of construction work since 2011.
Colorado construction industry insights. Although Colorado is expected to experience overall construction growth, some market segments are predicted to be stronger than others. The following are insights for 2018 broken down by industry sector:
•Single-family housing will continue to grow in 2018 and serves as a driving force for all other types of construction.
•Multifamily housing is beginning to level off
•Commercial buildings (office and hotel): The office building sector continues to thrive, whereas the hotel sector has peaked and has begun to fall off slightly
•Commercial buildings (retail and warehouse): The retail sector will continue to experience soft growth, with warehouses, including distribution centers, expected to grow in 2018.
•Institutional buildings (education): The bond measures that recently passed will allow for growth in the education sector in 2018, with K-12 serving as a bigger market sector for growth than universities/colleges.
•Health care is still fairly strong in Colorado, but is a volatile marketplace due to the uncertainty in health care policies and programs in the U.S. as a whole.
Although the construction outlook for 2018 for both the U.S. and for Colorado remains promising with continued growth, major issues such as the construction labor shortage and the overall capacity of the industry to keep up with demand represent challenges for the construction industry moving forward. To combat these issues that could hinder further growth in Colorado, AGC has undertaken one of the most substantial workforce recruitment efforts in the country with BuildColorado.com and the Construction Careers Now program.
Published in the Jan. 3-17 issue of Colorado Real Estate Journal