Several Industry Segments Peak in 2019

Dodge Data & Analytics released its 2020 Dodge Construction Outlook report at the 81st Annual Dodge Construction Outlook Conference in Chicago on October 31, 2019. The report predicts that total U.S. construction starts will slip to $776 billion in 2020, a 4% decline from the 2019 estimated level of activity at $808.7 billion. Commercial, multifamily and single family construction starts are all expected to fall back next year while the institutional segment is expected to remain the same.

Multifamily construction was an early leader in the recovery, 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.

Retail has struggled as the market has shifted, according to Dodge chief economist Richard Branch, who said that the lack of suburban single family growth has impacted the demand for big box stores such as Walmart. That, paired with an increase in the online sales market and retail being incorporated into mixed use construction, has stalled new construction in retail. However, much of retail activity is now focused on renovations, which make up 40-45% of all retail starts.

Office construction peaked in 2019 with data centers and headquarter construction driving much of the growth. Data centers made up 22% of the office segment in 2018 and around 14-17% in 2019.

Education starts are forecasted to grow 2% in 2020 to $65.7 billion, driven largely by K-12 construction. Branch pointed out that Gen Z is smaller than the millennial generation, which should impact the segment’s growth in the future. Healthcare starts are also expected to rise, with a forecasted 3% increase to $28.6 billion. Hospitals are pulling back while clinic and nursing home construction is growing across the U.S. However, the segment will remain robust due to several airport renovations.

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