Starts Will Slowly Climb in 2021 After Sharp Drop in 2020, Dodge Reports

Single-family housing and warehouse sectors will drive construction in the coming year

After dropping 14% in 2020 due to economic fallout from COVID-19, total construction starts are expected to rise 4% in 2021, Richard Branch, chief economist at Dodge Data & Analytics, said while presenting the 2021 Dodge Construction Outlook on Nov. 10. The 2020 decline will bring starts to $738 billion, with the company expecting that number to grow to $771 billion in 2021. Branch notes that a vaccine that is widely adopted by mid-year and additional government stimulus are built into the Dodge forecast.

Total residential starts are expected to rise 5% in 2021, following a 2% drop in 2020. Single-family housing starts will rise 7% in 2021, to $254 billion, the highest since 2007. Branch attributes the rise to low mortgage rates in addition to overall increased interest in suburban areas caused by the pandemic. Multi-family housing, however, has fallen 14% in 2020 and is expected to drop another 1% in 2021.

The overall value of new commercial construction starts has dropped 23% in 2020, Dodge reports. A 5% gain is expected in 2021. Warehouse construction was the only group to increase in the commercial sector, accelerated by the increased popularity of online shopping during COVID-19. Retail and hotel construction, two markets particularly affected by the pandemic, fell 25% and 46% in 2020, respectively. While Dodge expects retail to rebound 7% in 2021, hotel starts are slated to drop an additional 7%.

Institutional construction dropped 18% in 2020, with education down 10% and healthcare down 9%. Branch forecasts an overall 1% increase in the institutional sector during 2021, but notes that federal aid is needed before this sector sees much growth. Similarly, public works construction starts, which fell 9%, will be limited by uncertainty over federal appropriations in 2021, and is expected to stay flat next year.

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