Modest growth in housing and commercial building sectors will help fuel a 6 percent increase in U.S. construction starts next year, to $483.7 billion, according to a new forecast.
That's a slight uptick from the 5 percent increase (to $458 billion) estimated for 2012, McGraw-Hill Construction reports in its 2013 Dodge Construction Outlook.
A new construction industry report forecasts a 6% increase in construction starts in 2013.
The report is available for download here.
Long Road to Recovery
Uncertainty remains along the route to recovery, as the volume of total construction starts is still 32 percent below the 2005 peak on a current dollar basis—and 50 percent below, when viewed on a constant dollar basis, according to Robert Murray, vice president of economic affairs, McGraw-Hill Construction.
"The modest gains experienced during the past two years have, in effect, produced an extended bottom for construction starts, in which the process of recovery is being stretched out," Murray notes.
Murray also warns that the looming fiscal cliff poses a "significant downside risk" to short-term prospects for the construction industry and the economy in general.
"Assuming that efforts to cushion the full extent of the fiscal cliff are successful next year, keeping the U.S. economy from sliding back into recession, then there are several positive factors to benefit construction, including low interest rates and improving market fundamentals for several project types," he said.
Housing Gains Momentum
Single-family housing in 2013 is forecast to increase 24 percent, to $153.1 billion, corresponding to a 21 percent increase in units to 615,000, according to the report.
"The positives for single-family housing have become more numerous—the pace of foreclosures has eased, home prices are stabilizing, and mortgage rates are at record lows," McGraw-Hill says.
Also, multifamily housing is anticipated to rise 16 percent in 2013 to $40.3 billion.
Commercial Sector to Rise
The report indicates that commercial building will increase 12 percent in 2013, a marginally faster pace than the 5 percent gain estimated for 2012.
Both warehouses and hotels will benefit from lower vacancy rates during the year, while store construction will encounter more upgrades to existing space and the derived lift coming from gains for single-family housing, according to the report.
The increase for office construction will be modest, however, due to continued lender scrutiny of new privately financed projects, McGraw-Hill reports.
Despite the growth, the level of commercial building in current dollars will still be more than 40 percent below the 2007 peak, the report finds.
Mixed Bag for Other Sectors
The comprehensive 32-page report also offers the following forecasts for other construction sectors.
Institutional building is expected to level off, following the steep 13 percent drop estimated for 2012. For educational facilities, K-12 construction will slip further while college and university construction should at least stabilize, the report says. Health-care facilities are expected to make a modest rebound after this year's downturn.
The manufacturing building category is forecast to grow 8 percent, showing improvement after its 2012 decline.
Public-works construction is expected to slide an additional 1 percent, as federal spending cuts affect environmental projects. The new two-year federal transportation bill should help limit the impact of spending cuts on highways and bridges, the report says.
Electric utility construction is anticipated to dip 31 percent, after reaching a record high in current dollars during 2012. This year was boosted by the start of two large nuclear power plants, and projects of similar magnitude are not expected for 2013. The expiration of federal loan guarantees for renewable energy projects would also dampen construction in 2013.