Volume 49, Issue 1- January 2014

Sign of the Times
Indicators Predict Modest Construction Growth in 2014

by Casey Neeley

If a word had to describe Robert Murray’s construction industry forecast for 2014, that word might just be modest. Murray, vice president of economic affairs for McGraw Hill Construction, expects that U.S. construction starts will rise 9 percent for $555.3 billion, topping the 5-percent increase of $508 billion seen in 2013.

He was cautious, though, when he delivered the data. “I think the way 2013 has turned out it has some positive news, but also some negative as well,” he says. “Some people are saying yes, they are seeing definite signs of growth … but I’ve also heard comments that we aren’t seeing any signs of an upturn. It’s turning out to be subdued and selective.”

While Murray certainly conveyed caution when announcing the report, the results showed slight optimism in growth throughout 2014.

Commercial building is anticipated to increase in dollars 17 percent, which is up from 2013’s estimated 15-percent gain.

“The positives for commercial building are improving market fundamentals and more bank lending for commercial development,” he says. And while 17 percent may sound pretty good, he adds, “Next year’s activity in dollar terms will still be 28 percent below the 2007 peak.”

Multi-family housing, while still poised for dollar growth of 11 percent, will see a much more modest gain than it has in past years. Units are expected to increase 9 percent. “While starts are not expected to return to 2005’s bubble-induced level, the fact that 2012 starts were 30 percent below the previous decade’s average is an indication that further growth is needed to return this market to a normal level of activity,” according to the outlook.

Institutional building also is expected to increase 2 percent following five years of decline.

“The 2014 picture bears some similarity to what took place during 2013, with single-family housing providing much of the upward push; multifamily housing showing a slower yet still healthy rate of growth after four years of expansion, and commercial building gradually ascending from low levels,” says Murray. “One change that’s expected for 2014 is that institutional building will no longer be pulling down nonresidential building and total construction.”

He adds, “I think it’s turning positive … not a boom situation, but something that suggests the modest increases we’ve seen to date can be sustained into 2014 and beyond.”


USG
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