U.S. construction has been growing consistently since 2011 and growth is expected to continue in 2018. U.S. construction is forecasted to grow almost 5% in nominal dollars this year. Single-family, roads and bridges and institutional construction are the big drivers behind the expansion. However, with increased growth comes increased construction costs. Construction costs and material costs are expected to each increase 2-3%. Let’s look at these construction industry trends in more detail.
The residential segment is forecasted to experience 6% growth this year – led primarily by the 9% growth projected in single-family construction. On the other hand, multi-family construction hit its peak in 2017 and is forecasted to decrease slightly in 2018. The non-residential and non-building segments are expected to each increase by 4% this year. Along with multi-family housing, the industry is also anticipating a decline in hotel growth.
Demand for building materials in the U.S. is not expected to decrease within the next few years. A number of natural disasters affected the U.S. in 2017 – including multiple hurricanes hitting portions of the U.S. and Caribbean, as well as wildfires in California. Between industry growth and the natural disasters last year, building material demand will remain elevated. The higher demand is reflected in the increase of material prices.
The price of Gypsum products will experience the highest increase at 6-7%. Other building materials, such as cement, aggregates, concrete and lumber are expected to increase at a more moderate rate of 3-4% each.
In addition to the increased cost of building materials, the labor shortage continues to be a big challenge in the industry. Construction labor costs are expected to increase 3-4% in 2018. The labor shortage is significantly driving the 2-3% increase in construct costs as a whole.
It’s exciting to see another year of growth forecasted for the construction industry. Although growth will continue, companies will need to overcome the challenges of higher construction and material costs.
Take a look at Dick Building Company’s plans for 2018. For more details on the construction industry trends for 2018, view the 2018 North American Construction Forecast report by Oldcastle Business Intelligence.