Good News: Dodge Sees strong growth for at least one more Year

by JOHN GREGERSON with ROB McMANAMY | Nov 5, 2015

It's been a wacky, tumultuous 12 months for Dodge Data & Analytics, which had its ownership change hands last November and then saw its longtime editorial companions ENR and Architectural Record sold off to another buyer in June. Last week, the venerable construction forecasting and project lead generating giant even filed a federal lawsuit in Ohio against its main national competitors to combat alleged "illegal and anti-competitive business practices." (More on that in a separate story.)

So, last week's 77th Annual Dodge Construction Outlook Conference 2016 in Washington DC must have been a welcome retreat into a comfort zone where the hosts could finally focus on their core business again, at least for a day or two. Adding to the relief, no doubt, was the fact that our industry's outlook indeed is good for 2016.

Murray still smiling. — **Murray** still smiling.

"Good, not great," cautioned the ever-reserved Robert Murray, Dodge's longtime chief economist, speaking before hundreds of building products executives gathered at the capital's downtown Ritz-Carlton. “The U.S. economy continues to register moderate job growth, lending standards are still easing, market fundamentals for commercial real estate continue to improve, and more funding support is coming from state and local construction bond measures.”

Specifically, Murray sees a 6% increase, to $712 billion, in total U.S. construction starts next year. Coming on the heels of a 9% gain in 2014 and Dodge's projected 13% surge for this year, the forecast presents further evidence of sustained recovery after years of sluggish, post-recession activity. “For 2016, the economic environment should support further growth,” added Murray, who noted that while short-term interest rates will likely rise next year, long-term rate increases should remain gradual.

Of course, not all sectors will benefit, however. The news is particularly grim for electric utilities and gas plants, which will log 43% spending declines next year after a 159% leap this year. “The lift coming from new starts for liquefied natural gas export terminals will be substantially less, and new power plant starts will recede moderately,” according to the report.

What follows is a Dodge's breakdown by sector of what awaits industry members next year:

Construction spending for single family housing will rise 20%, adding 805,000 new homes as a result of continued employment growth and improved access to mortgage loans;
Spending for multifamily housing won't match this year's pace, but will rise 7% on the strength of low vacancies, rising rents, and demand from Millennials. In all, spending will add 480,000 units to the market;
Commercial spending will rise 11%, up from an estimated 4% gain for 2015, with office construction resuming its leading role in the sector. Look for private development and technology and finance firms to set the pace;
Institutional spending will advance 9%, following a 6% rise in 2015, with K-12 schools the beneficiaries of recent bond measures;
Though manufacturing spending will decline by 1%, it won't take the beating – a 28% plunge – it sustained this year due to pullback by large petrochemical plant starts;
Public works spending will be flat, continuing at about $122 billion this year, with boosts in environmental spending offset by a modest decline in spending for highways and bridges.

This week's welcome passage of a long-delayed, six-year infrastructure spending package by the U.S. House of Representatives should help the federal and state public works market at least hold steady for the foreseeable future. Now, the U.S. Senate and Obama Administration both are expected to move swiftly. Good thing, too. After all, the latest stopgap federal budget is set to expire Dec. 11.