With the clock ticking, measuring the last fleeting moments of 2013, all eyes are set on the upcoming new year. The air is buzzing with forecasts, especially when it comes to a time and money-consuming industry such as construction.
What will be the trends during 2014? Which undertakings will be most profitable? Should a contractor and a business owner bet on commercial or residential property development?
Those are all quite legitimate questions.
Prognosis filled with growing optimism worldwide
Back in May, Timetric, a London-based information service analyzing globally collected data, published a thorough report entitled “The Global Construction Industry 2013-2014: Market Trends, Buyer Spend and Procurement Strategies in the Global Construction Industry.” The respondents were 126 senior industry professionals who expressed optimism about the construction business worldwide.
Half of those directors, executives and managers surveyed were hopeful about revenue growth over the next 12 months. Among their expectations are that the levels of consolidation will increase along with merger and acquisition activities in 2014. The key drivers for the last two remain the yet slowly recovering global economy and weaker markets. In addition, large construction companies wish to increase their global presence while acquiring small and medium-sized construction businesses pressured by rising costs.
Battle on the home front
At the end of October 2013, McGraw Hill Construction, part of McGraw Hill Financial, released its 2014 Dodge Construction Outlook report. It is worth noting that, according to predictions, total U.S. construction will rise by 9% to $555.3 billion, compared to the forecast made last year: 5% to estimated $508 billion.
Amid economic uncertainty and federal spending cutbacks, there are still some factors to boost the construction industry, the report indicates. Like job growth, for example. According to data from the U.S. Bureau of Labor Statistics, nearly 6 million people were employed in the construction field this year. That number is expected to grow next year, making the industry a vital asset to the country’s economy. Another beneficial factor is that interest rates remain low amid the benevolent bank lending environment. The volume of loans is also growing.
Commercial property predictions
McGraw Hill Construction says that commercial building will increase by 17%, compared to an estimated 15% for 2013. Hotels and warehouses will be in demand, followed by stores and office buildings, according to their report.
Meanwhile, the Chicago-based Englewood Construction, a national commercial construction contractor, published its own 2014 predictions. Big is back, they say, explaining that mixed used, or large commercial properties, combined with considerable amount of retail, is the game during the new year.
- Upscale restaurants. The construction giant predicts that fine dining and white tablecloth establishments will never go out of style, and especially in large metropolitan areas, their number will continue to grow.
- Hotel development. Tourism prospects are looking good in Chicago, but also in other big cities around the country, compared to recent years. Research shows that in 2013, Chicago hotel occupancy rose to 75.5%, which is the highest since the recession started. So chances are that 2014 hospitality construction will be a significant chunk of the new year’s commercial construction market.
- Public works. Expectations are that large highway and bridge projects will most likely drop by 5%. Federal support for environmental public works will be limited though is possible that local governments will find money to finance small state projects.
- Institutional building. After five years of decline, this area is expected to mark an increase by 2% most likely in the educational building category: K-12 construction projects. No movements in the healthcare construction department.
Residential property predictions
- Single family housing. Again, McGraw Hill Construction goes as far as to foresee 26% growth. What contributes to this good climate is the slower pace of foreclosures; rising house prices and relatively low mortgage rates. However, banks will be careful with lending mortgage money.
- Multifamily housing. Here the increase will be by 11% in dollars and 9% in units. Though growth is steady, the percentage gains will be smaller compared to the last four years. The real estate finance community prefers this type of structure and more high-rise residential buildings will be seen in larger cities.