Cautiously Optimistic: ENR and Dodge Construction’s 2024 Forecast
Published on by Travis Knight in Construction
This season is a great time to reflect on another year gone by and look ahead with hopefulness at what’s to come in 2024 – and nothing captures this sentiment better than taking a glimpse at the construction market.
Looking at the industry forecast by the Engineering News-Record with help from the Dodge Construction Network among others, the total construction starts are projected to finish 2023 with a whimper, just 1% growth over 2022. However, 2024 looks to be a little sunnier with the forecast for total construction starts, which is estimated to increase 7%. The full article is available on ENR’s website, but here are a couple of key takeaways:
- Commercial and non-residential construction starts are expected to be down just 1% in 2023, with slight growth of 4% projected in 2024. The most noteworthy decline was construction starts of warehouses, expected to be down 18% in 2023 and projected to continue declining by 11% in 2024.
- Non-building construction starts are expected to increase by 25% in 2023 and are forecasted to continue to rise another 7% in 2024. This segment is heavily weighted by infrastructure spending, buoyed by the Infrastructure Investment and Jobs Act passed in 2021 which will provide an additional $550 billion of spending over five years.
- Hotel starts are expected to be on the rise in 2024, with a projected increase of 16%. After an up-and-down couple of years for travelers, hotels appear to be immune to the economic outlook projections for 2024 and beyond.
- According to Dodge, residential construction starts are expected to be down 13% to end 2023 before an expected rebound in 2024 of 11%. The trend was consistent for both single-family (down 16% in 2023, up 9% in 2024) and multifamily (down 8% in 2023, up 14% in 2024). The rebound isn’t likely to indicate a significant surge, however: despite the expectation that mortgage rates will decline slightly, rates will still be far from the mortgage rate floor from a few years ago.
- The National Association of Home Builders has a slightly less rosy outlook on residential construction starts, specifically multifamily starts, estimating a 15% decrease in 2023 and a 17% projected decrease in 2024, due primarily to the number of units already under construction.
While there’s reason to be optimistic about the industry based on some of the projections noted above, it would be wise to proceed with caution, as economic forecasters, such as our friends at ITR Economics, continue to project a mild recession for 2024. You can read more about that in ITR’s recent blog post. You can also access the full on-demand recording of Dr. Alan Beaulieu’s economic forecast for 2024 here on our website. And if you need help navigating the economy’s and construction industry’s ups and downs, contact your advisors at Barnes Dennig – as always, we’re here to help.