2020 Construction Outlook: Have We Hit the Peak?
The bad news: We may be at the top of the rollercoaster.
The good news: It looks like more of a dip than a downturn.
After falling an estimated 1% in 2019, construction starts are expected to slip 4% in 2020 according to Dodge Data & Analytics in its 2020 Dodge Construction Outlook. This represents a fall from 2019’s projected activity of $809 billion to $776 billion in 2020.
“The recover in construction starts that began during 2010 in the aftermath of the Great Recession is coming to an end,” said Richard Branch, Chief Economist for Dodge Data & Analytics. “Easing economic growth driving by mounting trade tensions and lack of skilled labor will lead to a broad based, but orderly pullback in 2020. After increasing 3% in 2018 construction starts dipped an estimated 1% in 2019 and will fall 4% in 2020.”
But it’s not a repeat of what occurred during the Great Recession that shook the country and the world, and in particular the construction industry, between 2007 and 2009, according to Branch. “Economic growth is slowing but is not anticipated to contract next year,” said Branch. “Construction starts, therefore, will decline but the level of activity will remain close to recent highs.”
According to Dodge Data & Analytics in its 2020 Dodge Construction Outlook:
- Single Family Residential: Single family residential housing will drop 5% to 765,000 units in 2020 representing a 3% decline in construction value to $217 billion.
- Multifamily Residential: Multifamily residential housing, an early leader during the recovery began to lag in 2017 and will continue to lag in 2020, falling 15% to 410,000 units in 2020 representing a 13% decline in construction value to $78 billion. Long-term economic and demographic changes, however, are expected to keep this segment of the industry strong.
- Commercial Buildings: Commercial construction is expected to decline 10% to 670 million square feet representing a 6% decline in construction value to $120 billion. Within this segment, retail is anticipated to drop 18% to 66.5 million square feet representing a 14% decline in construction value to $14.7 billion, warehouses are expected to drop 13% to 251 million square feet representing a 10% decline in construction value to $22.8 billion, hotels/motels are anticipated to drop 15% to 63 million square feet representing an 11% decline in construction value to $16.3 billion, and office buildings are expected to drop 4% to 133 million square feet representing a 2% decline in construction value to $50.1 billion.
- Manufacturing Facilities: Manufacturing will fall 9% to 64.4 million square feet representing a 2% decline in construction value to $22.7 billion.
- Institutional Buildings: Institutional building will drop 4% to 323 million square feet but its construction value will remain unchanged at $142 billion. Within this segment, educational facilities are expected to increase 2% for a construction value of $65.7 billion representing 139 million square feet, healthcare facilities are anticipated to increase 3% for a construction value of $28.6 billion representing 74 million square feet, transportation facilities are expected to increase 5% for a construction value of $12.8 billion although square footage will decrease 8% to 27 million square feet, recreation facilities are anticipated to decline 8% for a construction value of $17 billion representing 38 million square feet, and public buildings are expected to decline 1% for a construction value of $10.4 billion representing 20 million square feet.
- Public Works: Public works construction will increase 3% percent to $164 million
- Utilities: Utilities will drop a significant 27% to $32.2 billion. However, this follows an increase of 83% in 2019 when several expert facilities and wind projects broke ground.
California Construction Law Blog | Nomos LLP 
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