A Healthy Market  
Construction Economists  
Diagnose Further  
Expansion Through 2018  
b y N i c k S t . D e n i s  
f you were hoping to stay busy  
this coming year, there’s good  
news.  
Most nonresidential build-  
ing segments are poised for  
I
continued growth in 2018, while  
multifamily construction is easing  
back but remaining resilient after  
a half-decade spike, according to  
Dodge Data & Analytics’ new 2018  
outlook report.  
Dodge chief economist Robert  
Murray presented the outlook in  
early November at the 79th annual  
Outlook Executive Conference in Commercial Building  
Chicago.  
“We’ve now moved into a more  
In terms of dollar value, commercial  
mature state of expansion,” Murray  
said.“… But there is still ample ev-  
idence to suggest the construction  
industry has room to grow in 2018.”  
The total construction industry  
saw increases from 11 to 13 percent  
per year from 2012 through 2015.  
Starts advanced 5 percent in 2016  
and are estimated to rise 4 percent  
in 2017.Looking ahead,Dodge proj-  
ects 3-percent growth in 2018.  
Prospects are positive for non-  
residential segments that use large  
amounts of glass—particularly in  
the commercial and institutional  
categories.  
building registered a 3-percent gain in  
2017 and will increase another 2 per-  
cent next year.  
Office construction has been on a  
steady incline from 2011 to 2014 be-  
fore slowing in 2015. It saw renewed  
growth over the past two years and will real estate services company CB Rich-  
continue its climb next year, though at ard Ellis, the downtown office vacancy  
a more moderate 5-percent pace.  
rate in the U.S. was at 10.6 in the third  
“The office market may be approach- quarter, with the suburban office va-  
ing its peak, but it has not reached its cancy rate at 14.1.  
Much of the recent office con-  
peak,” Murray said.  
Murray said office vacancy rates struction activity is coming from  
have receded through the third quar- highrises, particularly corporate  
ter of 2017 “in a more gradual manner buildings (including headquarters),  
than prior expansions.” According to as well as data centers and govern-  
90  
USGlass, Metal & Glazing | December 2017  
www.usglassmag.com  
ment buildings. Murray added that  
office alterations have strengthened  
considerably.  
New York City remains the leader in  
office construction among metropoli-  
tan areas,though it scaled back in 2017 family sector has reached a mature  
in terms of dollar value. San Francisco state. After large year-over-year gains  
registered major gains in 2017, and of- for much of the last decade, this cat-  
fice construction in Chicago, Houston egory decreased 7 percent in 2017 and  
Multifamily Building  
On the residential side, the multi-  
and Baltimore spiked as well.  
Elsewhere in the commercial cate- cent next year.  
gory, hotel and store construction have The recent setbacks have been driven  
is projected to decline another 11 per-  
“Rental vacancy rates have retreated  
both slowed down, though Murray in part by a pullback in multifamily and rents have increased, although the  
said “store renovations have held up construction in New York City, though fundamentals are now beginning to  
much better than new construction.” that market still continues to dominate shift,” he said.  
He added that large mixed-use proj- the sector in terms of dollar value.  
Single-family building is expected to  
ects are providing support to retail  
construction.  
Murray said the multifamily seg- continue its takeover of the residential  
ment has been helped by a push for construction market in 2018, as mort-  
Hotel construction is set to retreat downtown redevelopment, and that gage interest rates remain low and the  
next year, with store construction edg- demographic support has come from millennial generation transitions to  
ing up slightly.  
both empty-nesters and young adults. home ownership.  
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December 2017 | USGlass, Metal & Glazing  
91  
A Healthy Market  
continued from page 91  
T(inhBiellionPs oaf Dtotlelarrs)n of U.S. Construction Starts  
Multifamily Housing  
Commercial Buildings  
$
160  
140  
120  
100  
$160  
$140  
$120  
$100  
$80  
$60  
$40  
$20  
$
$
$
$
80  
60  
40  
$
$
$
20  
$
0
$0  
Source: Dodge Data & Analytics  
C(inoMnilltiornascotf DVolalarlsu)e of Construction in Key Glass Sectors  
2
016  
2017  
2018  
% Change % Change  
Glass Sectors  
Stores & Shopping Centers  
Actual  
$20,417  
$40,072  
$17,330  
$33,970  
Estimate Forecast  
’17/16  
-10  
11  
-4  
’18/17  
$18,425  
$44,325  
$16,575  
$35,275  
$19,000  
$46,700  
$15,875  
$35,800  
3
5
Off ce Buildings  
Hotels and Motels  
-4  
1
Other Commercial Buildings  
Total Commercial  
4
$111,789 $114,600 $117,375  
$19,968 $25,375 $25,150  
$50,980 $54,425 $60,300  
3
2
Manufacturing Buildings  
Educational Buildings  
Healthcare Facilities  
27  
7
-1  
11  
2
$26,016  
$41,454  
$27,250  
$27,775  
5
Other Institutional Buildings  
$53,800 $51,125  
30  
14  
9
-5  
3
Total Institutional & Other $118,450 $135,475 $139,200  
Single Family Housing  
Multifamily Housing  
$201,144 $219,825 $239,950  
$95,164 $89,125 $82,150  
$296,308 $308,950 $322,100  
9
-6  
-8  
4
Total Residential  
4
Source: Dodge Data & Analytics  
92  
USGlass, Metal & Glazing | December 2017  
www.usglassmag.com  
The Economic  
Environment  
Several indicators, including the labor market, stock market  
and consumer confidence levels, tell a story of a U.S. economy  
that is riding high.  
Institutional Buildings  
$
160  
140  
120  
100  
Cristian deRitis, senior director at Moody’s Analytics, told at-  
tendees of the 2018 Dodge Construction Outlook Conference  
that the general outlook of the economy is positive.  
There are a record number of job openings (more than 6.1  
million), and the unemployment rate remains in the low 4-per-  
cent range, with only 6.8 million people unemployed.  
deRitis noted that there are nearly enough jobs available  
for all of those unemployed, but that a “skills mismatch” re-  
mains a hurdle. Additionally, factors such as the opioid crisis  
are disqualifying workers from jobs in many fields, including  
construction and trucking.  
That aside, the “quit rate” in the U.S. is rising to record lev-  
els, which deRitis said is a good sign for the labor market. “It’s  
a risk to quit your job for something else,” he said, adding that  
a high quit rate demonstrates confidence in the labor force  
that there are better opportunities out there.  
$
$
$
$
80  
60  
40  
$
$
$
20  
$
0
I’m very optimistic in the labor market today, and this is a  
trend that should continue throughout 2018,” he said.  
deRitis said both individuals and businesses are confident  
about the future, and home equity has been rising, further  
increasing consumer confidence.  
He said the commercial real estate market looks promis-  
ing, though the biggest threat is the potential for increased  
interest rates. “If interest rates do rise, this could make some  
projects look unprofitable that look profitable today.”  
He added that there is a need for general infrastructure  
spending, but concerns on the local, state and federal levels  
may stand in the way. Other uncertainties include tax reform,  
which could provide a boost to businesses and spur investment.  
“So when is the next recession?” deRitis asked, answering  
his own question with a prediction of 2020, based on how he  
projects the unemployment rate to trend. He said historically  
recessions have come in ten-year intervals and toward the be-  
ginning of the decade.  
Institutional Building  
The institutional side spiked 14 percent this year and  
is projected to grow 3 percent next year. Growth has  
been helped by educational building, which continues  
to increase in 2017 and will again do so in 2018.  
K-12 school construction is larger and more volatile  
than colleges and universities,” said Murray. He said in  
015-2016, much of the upturn came from K-12 proj-  
2
ects, though colleges have strengthened in 2017.  
Healthcare facility construction has also been ticking  
up over the last few years and will increase again in 2018.  
The ongoing debate over healthcare reform has cre-  
ated near-term uncertainty, though a push to move  
along previously deferred projects has supported growth  
in 2017. Additionally, the storefront clinic subsector is  
growing and could be a plus for renovation work.  
“Though it will probably be a garden variety recession—prob-  
ably more of a six-to-nine-month recession,” he said. “It will be  
nowhere near the depth of the GDP contraction or the unemploy-  
ment rate we saw [in the Great Recession].”  
n
The sector is still supported by a need to replace aging  
facilities,growth of the elderly population and a move to-  
ward the‘hub-and-spoke’ system,”added Murray.  
Another key subset within institutional has been  
transportation terminals, where construction surged  
N i c k S t . D e n i s is the research editor  
of USGlass magazine. He can be reached  
at nstdenis@glass.com. Follow him on  
Twitter at @NickStDenis.  
1
20 percent in 2017. While that sector will pull back  
slightly in 2018, it will maintain its elevated rate.  
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December 2017 | USGlass, Metal & Glazing  
93  

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