The US construction industry has enjoyed expansion over the last three years, but we are now seeing a slowdown in this growth. Construction starts grew by 7% in both 2016 and 2017 and slowed to 3% in 2018.
US summary 2020
US summary 2020
USA Market Review
In the Northeastern United States, an aging population will impact the ability to find skilled workers, as well as the types of projects undertaken. Boston and New York remain exceptions, with high-paying jobs drawing in younger workers. To keep up with the technology boom, the key construction verticals will be healthcare, hospitality and commercial spaces. Although commercial construction is expected to have peaked, there has been an increase in residential construction in the Boston area, with an estimated 20,000 new apartments under construction.
In 2020, square footage is expected to decline in all sectors of commercial building, due to rising interest rates and higher land costs. A maturing economy and rising interest rates will add pressure this year, leading to a decline in total housing starts.
In the Southeast, the construction industry will continue to be very strong. Florida will see jobs grow by 2.5 percent, some of which will be necessary growth in the construction sector. In Georgia, construction continues to be the strongest industry, with a 6 percent job increase. There will be significant construction growth in international airports in the Southeast, particularly in Florida, where there will be a major expansion at the Pensacola airport aviation maintenance facility. For the commercial and manufacturing sectors, the Atlanta market remains robust. However, this growth is not expected in other states, as companies continue to look towards markets where the availability of a skilled workforce and greater incentives exist.
Total data center capacity expected to increase by 17.3% in 2020.
Although commercial construction in the US is expected to drop by 6 percent in 2020, high-value data center construction will continue to rise. With the total US data center capacity expected to increase in key markets by 17.3 percent in 2020, Northern Virginia is expected to benefit. In other parts along the Eastern region, there will be an expected slowdown in data center construction due to the lack of suitable land, inadequate square footage, rising interest rates and high construction costs.
For the South Central region, the 2020 commercial and manufacturing forecast is projected to stay on pace with a very strong 2019. Companies from a variety of sectors are relocating to the region and it remains an economic choice for manufacturing facilities. This region will see continued growth into next year, with expanded investments in healthcare, manufacturing, retail, lodging and public infrastructure. In Texas, economic strength from the energy, data center and high-tech sectors will contribute to growth in the construction industry. The outward expansion from Silicon Valley tech companies into the Texas market, which includes Apple’s $1 billion investment in a new campus in Austin, will boost construction and employment rates. Similarly, more high-tech investments are being drawn to Oklahoma, with a $600 million expansion by one of the major global tech companies already in development. Because of its location in the heart of the nation, Oklahoma is also in a geographically ideal position for transportation and distribution centers, with major players like Amazon adding a second warehousing and distribution facility in Tulsa.
The Midwest region, compared to other regions in the US, had very similar results across state lines, making it one of the most homogenous regions for construction. The Midwest states all landed with similar results in most metrics we examined. Overall, there appears to be a slowdown for this region, both in construction spending and job growth. In the commercial real estate market, 2019 was the strongest year since 2007. Chicago is seeing a major increase in usage of suburban and urban office spaces, as the young, dynamic workforce has fueled an influx of high-tech companies. Growth in this sector will slow down in 2020, but remain strong. Healthcare markets in the Midwest slowed down significantly in 2019. Big hospitals are under pressure to reduce costs amid declining inpatient care, whereas outpatient clinics are leveling out after several years of growth. Non-traditional treatment, such as virtual clinics and retail clinics (CVS), are growing rapidly.
Michigan and Kentucky, which are dependent on the automotive industry, will also see growth in the construction sector. Fiat Chrysler Automotive and General Motors plan to update plants in Michigan, while Brady Industries is investing $1.6 billion in an aluminium rolling mill in Ashland, Kentucky.
In Minnesota, the demand for housing has fueled construction in the residential sector. In December, as a response to the lack of affordable housing, Minneapolis became the first US city to ban new single-family houses as a way to reinvigorate multifamily housing development. Labor shortages will remain a challenge for the construction industry in the entire Central region, as market demand continues to grow.
In the Western region, high housing costs in California are beginning to benefit neighboring states, with many buyers fleeing California and creating housing booms in other states. The state expects a decrease in the number of residential units being built of approximately 5,000, although this number is expected to make a turnaround in 2021. The Governor of California is also threatening to withhold funding from localities that fail to meet zoning and construction goals on housing, which may slow down residential construction even further.
Idaho, on the other hand, is seeing a boom in residential construction, with many large-scale residential projects taking place throughout the state to ease housing shortages. Nevada is also seeing steady growth in the residential sector, due to an influx of retirees to the state. Oregon is moving to mixed-use and multifamily housing projects to keep up with real estate demands. There are also many large-scale projects in the hospitality and commercial industries in the state, including new technology factories and an airport upgrade.
In Las Vegas, a number of large-scale projects are creating a construction boom, with $23 billion worth of projects underway, mostly in the hospitality industry. Unfortunately, the high level of construction activity has caused labor shortages in the state, with employers unable to find skilled workers. On the other hand, Arizona is seeing increased employment levels in the construction industry.