The U.S. economy is strong, which has been good news for the construction sector and specialty contractors such as glaziers, but where is the market headed? The 80th Annual Dodge Construction Outlook Conference, held in late October at the Gaylord National Resort & Convention Center in National Harbor, Md., looked at trends impacting construction and forecasted the amount of growth expected in 2019.

Construction starts and spending show that construction growth will continue, but at a slower pace, according to Dodge Data & Analytics chief economist and vice president Robert Murray. Construction starts grew 7 percent in 2017 and are predicted to grow 3 percent in 2018. Construction put in place grew 5 percent in both 2017 and 2018.

According to the reports, construction starts by market sector show that residential building was flat from the second quarter of 2018 to the third quarter after a pullback in the second quarter, whereas commercial building, institutional building and public works all saw declines. For the year, residential building has shown a slight growth increase from 3 percent in 2017 to 6 percent in 2018, while commercial building has plateaued at 2 percent in both 2017 and 2018.

This slowing of growth is mirrored by the Dodge Momentum Index, which has shown a decline in the commercial sector and leveling off by the institutional sector.

Murray says there are several tailwinds and headwinds impacting the current U.S. economy. Tailwinds include the relatively strong economy in 2018 with an expected full year GDP increase of 3 percent, easing bank lending standards, some Dodd-Frank restrictions on banks rolled back, federal legislation and state and local bond measures passed in recent years. The U.S.’s forecasted GDP for 2019 is estimated to increase 2.5 percent from 2018.

Headwinds include rising interest rates, tariffs and rising material prices, tight construction labor markets and some deceleration in rents and occupancies for commercial and multifamily building.

Murray also looked at the Producer Price Indexes from the U.S. Bureau of Labor Statistics. The price of flat glass has been increasing for years. The price increase was more modest in 2017 with a 0.9-percent increase after a 5.1-percent jump in 2016. The price of flat glass is expected to increase at a higher rate in 2018, with a 2.9-percent rise in September 2018 compared to the price in December 2017.

The multifamily housing market in the U.S. slowed in 2016-2017 after steady growth from 2010-2015, but most top ten markets retreated in 2017, according to Murray. He expects to see an increase of 2 percent in 2018 but a drop of 8 percent in 2019. The major cities driving the sector are New York, Washington, D.C., Miami, Boston and Seattle, which have all shown increases in new multifamily housing construction from the first nine months of 2017 to 2018. Among the top ten metropolitan areas, Los Angeles, Chicago and Atlanta have shown decreases.

The nonresidential building sector grew steadily from 2011 through 2014 and began to decelerate in 2015, according to Murray. That was followed by growth in 2016-2017. Murray expects growth to level off in 2018 and for the market to shrink by 4 percent in 2019.

Office buildings shared a similar pattern with nonresidential building, but the sector is expected to grow modestly in 2018 and 2019. According to Murray, much of the new office construction involves high-rises, and office alterations have strengthened considerably. Data centers, government office buildings and corporate buildings and headquarters have driven growth.

However, retail stores and shopping centers declined by 5 percent in 2017 and are expected to decline a further 9 percent by the end of 2018. Murray forecasts a more modest 1-percent drop in 2019. Trends driving this drop are the impact of online sales, large retailers closing stores, large mixed-use projects providing support to retail construction and an increase in store renovations.

Educational buildings have grown consistently since 2014, with 11 percent growth in 2017, 11 percent expected growth in 2018 and estimated growth of 6 percent in 2019. Year-to-date in 2018, community college, laboratory and high school construction has increased since 2017.

The healthcare facilities category dropped 5 percent in 2018, but is expected to grow 7 percent in 2019. According to Murray, uncertainty over healthcare reform is impacting the sector, but growth is supported by the need to replace aging facilities and the growth of the elderly population.