2020 Dodge Construction Outlook – Down in Key Segments

Each year many in the construction industry eagerly await the Dodge Construction Outlook. For 2020 Dodge Data & Analytics is forecasting a $776 billion construction market.  Which sounds great, except it represents a 4% decline versus 2019’s projected activity of $809 billion, which is  down 1% from 2018’s high of $815 billion.

Given the breadth of the construction market, let’s look at elements that directly impact the electrical industry.  And, it’s important to note, these insights are best for manufacturers and national distributors as the data is national … for most distributors, the key is seeking state and local information, but the Dodge information can highlight trends to support your 2020 planning and forecasting.

Digging into the Numbers

Key markets

• Single family residential will drop to 765,000, a 5% decline in units from 2019 and represent $217 billion, a 3% decline in construction value.
• Multi-family residential will drop another 15% to 410,000 units valued at $78 billion, down 13%.
  • In September 2019, 71 multi-family projects with a value over $100 million each broke ground throughout the country with 24 of these projects in New York! (In 2018, 80 did.)
  • While this market will be down in 2020, longer-term economic and demographic changes will keep this segment strong, especially the large projects, in the coming years.
• Commercial construction, key to the electrical industry, will drop to 670 million square feet, a 10% decline in footage and a 6% decline in value to $120 billion.
  • Stores and shopping centers (retail) – Retail will drop 18% to 66.5 million square feet and $14.7 billion, a 14% decline in value due to economic slowdowns, consumer spending becomes more restrained and increases in online ordering. It’s possible that 50% of the retail construction spend will be for renovation work.
  • Commercial warehouses – a decline of 13% to 251 million square feet valued a $22.8 million, a 10% decline in value. The growth comes from very large, typically online company-driven, projects.
    • This segment includes data centers, which have had significant growth.  In the first nine months of 2019, 57 data centers projects broke ground valued at $6.1 billion (more than 10% of the overall market!)
  • Hotels / Motels – Dodge projects a 15% decrease to 63 million square feet and an 11% drop in value to $16.3 billion.
  • Office buildings – Construction activity is correlated with office employment and typically lags growth by one year. In 2020, this market is projected to decline 4% to 133 million square feet valued at $50.1 billion, a 2% decline.
• Manufacturing construction will decline 9% to 64.4 million square feet and be valued at $22.7 billion, down 2%.  (Note, this is not overall “manufacturing”, only manufacturing construction .. work done by contractors.)
• Institutional buildings (government, education, medical) remains unchanged at $142 billion although square footage dips by 4% to 323 million square feet. (But this category includes airports, so can be deceptive as anyone who travels will agree that every airport seems to have some construction going on.)
  • Education– An increase of 2% is projected to $65.7 billion and 139 million square feet.
  • Healthcare – An increase of 3% is projected to $28.6 billion for 74 million square feet.
  • Transportation – An increase of 5% to $12.8 billion while square footage decreases 8% to 27 million square feet. (think airports, so localized)
  • Recreation – A decline of 8% to $17 billion and a square footage decline of 12% to 38 million square feet (think arenas, so very localized)
  • Public buildings – Square footage declines 3% to 20 million square feet and declines 1% to $10.4 billion.
• Public works will increase 4% to $164 million … but this doesn’t have much impact on the commercial / industrial market but could help those who sell into the utility industry as well as roadway lighting.  Think streets and bridges, environmental public works, site work, pipelines, rail lines, sports venues without roofs, and electric power and gas plants.
• Electric power / utility construction will decline a massive 27% to $32.2 billion (and this is large, multi-billion projects.

Other Highlights

• GDP for 2020 is projected at 2% and Dodge projects if tariffs remain “as is” then GDP may be 0.5-1% in 2020.
• Lack of available labor will constrain growth in 2020 (so, if planning for hires, it may take longer, so consider starting searching a little earlier or, if you see someone you like, act quickly.)
• Economy expected to slow to a rate of 1.5% in 2020 with “okay” growth the first half and slowing by year-end but not, “technically”, a recession.

Unfortunately, the construction outlook, from an electrical viewpoint, isn’t pretty and correlates to the electrical industry forecasts we shared last week to help with your 2020 planning.

Residential, commercial and manufacturing construction are all projected down. But, there’s always light at the end of the tunnel … focus locally, focus on taking share, focus on renovations, focus on productivity services (due to labor issues).  Remember a key phrase, “millions of square feet” … there’s still lots of construction activity.

Remember what Mom said about lemons?  Make lemonade!