US construction starts to slip back in 2020
but decline will not be anywhere near the
level of the Great Recession: Dodge
North Carolina Construction News staff writer
The chief economist for Dodge Data & Analytics of-
fered an outlook for the US construction industry in
2020 on Oct. 31, and his perception is that there will be
a decline in most sectors – but this slowdown will not
be a severe crash and, in part, is caused by a skilled
labour shortage.

“The recovery in construction starts that began dur-
ing 2010 in the aftermath of the Great Recession is
coming to an end,” said Richard Branch at the 81st an-
nual Dodge Outlook Conference in Chicago.

“Easing economic growth driven by mounting trade
tensions and lack of skilled labor will lead to a broad
based, but orderly pullback in construction starts in
2020,” Branch said. “After increasing 3% in 2018,
construction starts dipped an estimated 1% in 2019
and will fall 4% in 2020.”
“Next year, however, will not be a repeat of what the
construction industry endured during the Great Reces-
sion. Economic growth is slowing, but is not anticipated
to contract next year. Construction starts, therefore, will
decline but the level of activity will remain close to re-
cent highs. By major construction sector, the dollar
value of starts for residential buildings will be down 6%,
while starts for both nonresidential buildings and non
building construction will drop 3%.”
The pattern of construction starts for more specific
segments is as follows:
The dollar value of single family housing starts will be
down 3% in 2020 and the number of units will also lose
5% to 765,000 (Dodge basis). Affordability issues and
the tight supply of entry level homes have kept demand
for homes muted and buyers on the sidelines.

Multifamily construction was an early leader in the re-
covery, stringing together eight years of growth since
2009. However, multifamily vacancy rates have moved
sideways over the past year, suggesting that slower
economic growth will weigh on the market in 2020.

Multifamily starts are slated to drop 13% in dollars and
15% in units to 410,000 (Dodge basis).

The dollar value of commercial building starts will re-
treat 6% in 2020. The steepest declines will occur in
commercial warehouses and hotels, while the decline in
office construction will be cushioned by high value data
center construction. Retail activity will also fall in 2020,
a continuation of a trend brought about by systemic
changes in the industry.

In 2020, institutional construction starts will essen-
tially remain even with the 2019 level as the influence of
public dollars adds stability to the outlook. Education
building and health facility starts should continue to see
modest growth next year, offset by declines in recre-
ation and transportation buildings.

The dollar value of manufacturing plant construction
will slip 2% in 2020 following an estimated decline of
29% in 2019. Rising trade tensions has tilted this sector
to the downside with recent data, both domestic and
globally, suggesting the manufacturing sector is in con-
traction. Public works construction starts will move 4% higher
in 2020 with growth continuing across all project types.

By and large, recent federal appropriations have kept
funding for public works construction either steady or
slightly higher – translating into continued growth in en-
vironmental and transportation infrastructure starts.

Electric utilities/gas plants will drop 27% in 2020 fol-
lowing growth of 83% in 2019 as several large LNG ex-
port facilities and new wind projects broke ground.’
In his presentation, Branch provided a word graph in-
dicating that construction executives currently believe
the skilled labour shortage is their greatest impediment
to growth. However, there are other factors and risks,
including increased trade tensions and monetary policy
challenges, that could add to economic stresses in the
months ahead.

The North Carolina Construction News — NOV/DEC 2019 — 3