The Construction Industry in America is a gigantic engine that drives the nation’s economy.
The industry builds billions in projects every year.
In the past few years, cranes and construction crews were busy on major developments such as:
- Hudson Yards in New York which is a massive office, residential and retail center above a rail yard
- The giant indoor amusement park at the American Dream complex in northern New Jersey
- Two new billion-dollar Star Wars exhibits at both Florida and California Disney properties
- A billion dollars in renovations at the Hard Rock Casino in Fort Lauderdale that includes a guitar-shaped hotel
- Two new billion-dollar NFL Stadiums in Los Angeles and Las Vegas.
The industry involves about 680,000 businesses that provide paychecks for more than 7 million employees.
However, construction does face its challenges. That’s why in their 2020 Construction Outlook, Dodge Data and Analytics forecasts a slight drop in project starts next year.
The biggest reasons – continued lack of skilled labor and uncertain trade discussions, mainly between the US and China.
For that reason, Dodge predicts:
- Public works – this is the only category where Dodge sees an increase. They forecast 4% growth in construction starts in 2020.
- Institution – this sector is forecast to be about the same as this year. Look for modest growth in education and health facilities.
- Multifamily – this has been a hot category for the past eight years. But now Dodge predicts a slowdown of 15% in new units as the market catches up.
- Commercial – Dodge predicts a 6% drop in commercial starts. Warehouse, hotels and retail construction will see fewer starts, but that will offset somewhat by growth in data center construction.
- Manufacturing – Dodge foresees a slight slip to 2% less dollar value in new plants next year compared to this year. Trade tensions are definitely hampering this category. But if that changes, there could be an upswing in construction starts.
- Utilities – this category for electric and gas plants could see a decrease by as much as 27%. But that is mainly due to a very active 2019 as several large facilities and projects, such as liquified gas and wind turbines, were started recently.
- Single Family – Dodge forecasts a drop in starts by a modest 3% next year. The big issue is the lack of entry-level homes which will probably be addressed in the near future. The demand is certainly there.
- Smart Cities – not included in the Dodge report, but it is worth noting. This is expected to be a super-hot category in the next decade. Investment in building smart, sustainable cities is forecast to be in the trillions in the coming years. Microsoft, IBM, Cisco, and even Google are positioning themselves to be big players in this arena.
Forecast says lack of skilled workers is a major hurdle
The labor shortage continues to obviously be a big challenge for construction. If you can’t find skilled workers to build these buildings, that will slow down momentum.
But at least this predicted overall drop in construction starts from year to year will be mild and contractors will still be very busy.
“Next year will not be a repeat of what the construction industry endured during the Great Recession. Economic growth is slowing but is not anticipated to contract next year,” said Richard Branch, Chief Economist for Dodge Data and Analysis. “Construction starts, therefore, will decline but the level of activity will remain close to recent highs.”
“Easing economic growth driven by mounting trade tensions and lack of skilled labor will lead to a broad-based but orderly pullback in construction starts in 2020,” Branch added. “After increasing 3% in 2018, construction starts dipped an estimated 1% in 2019 and will fall 4% in 2020.”
And, if those trade discussions are finally resolved, that could be a nice impetus for growth next year.
Another potential bright lining for 2020 has to do with innovation taking place in the construction industry.
Technological advancements are starting to ramp up.
Technological advancements continue to ramp up. For an industry that is traditionally slow to adopt new practices, these innovations could be a sea-change in helping to increase profits, cut expenses and waste, reduce time frames and land more projects.
Tech advancements will improve efficiencies
Look for better efficiencies from progress in:
Mobile technology – enabling more on-site improvements and reporting that can be made quickly.
Construction management software
Building information modeling
Augmented reality – a faster way to display future projects and make revisions.
Drones – gaining in popularity for mapping, progress reports, and safety
Prefab construction – this will help with labor shortages and time frames
Robotics – if there is a worker shortage then you might start seeing more robots on the job to fill the gap. There has already been incredible advancements in certain tasks such as bricklaying.
Recruitment – to address the labor shortage, look for a big push in promoting careers in this industry and better training programs. Also, look for a strategy to attract more women into this field. The pay and the jobs are there for the asking.
Green Buildings – this will continue to be a hot trend as more and more people want to see sustainable construction and will support the projects that try to be as environmentally-conscious as possible. (As mentioned about Smart Cities above).
Sure, the Dodge forecast is that construction may slow slightly next year. This actually is expected after several years of recovery and demand for new construction after the recession.
But if economic growth can continue and remain positive, then there will a continued demand for new apartment buildings, stores, offices, hotels, schools, warehouses, and other facilities.
The construction business is BIG business in the US.
This category not only employs several million workers but also provides revenue and employment for related businesses such as appliance, tool and equipment manufacturers, commercial site furnishing companies, transportation firms, mining companies, etc.
Bottom line: A healthy construction industry is healthy for everybody. The forecast for 2020 looks to be one where builders will still be in good shape.
Note: The Park and Facilities Catalog has been a major supplier of commercial site furnishings for the construction industry since 2001. Our products include top-grade commercial bike racks, park benches, picnic tables, trash receptacles and hundreds of other items. We also have many items in stock in our warehouses that we can quick-ship from our location in 3 days or less.