CMD forecasts 7.4% gain in 2016 nonresidential construction starts

Dive Brief:

CMD Group’s Q2 forecast report predicted that the dollar amount of year-over-year residential and nonresidential construction starts will increase by 7.4% in 2016, up nearly 1% from its Q1 prediction. First-quarter starts in 2016 were actually 7.4% higher than the 6.5% CMD had projected.
CMD predicted the primary drivers of construction starts will be the nonresidential building categories of office buildings, transportation terminals and medical facilities, which will help boost that category by 6.4%. CMD also expects a strong showing of 1.5% growth for the civil engineering category of roads and bridges.
The construction data research company said that by 2020 — the end of CMD's forecast period — the entire value of construction starts will reach $700 billion.

Dive Insight:

Other key forecasts from CMD’s Q2 2016 report include:

Military facility construction will increase by almost 30% in 2016 after a 384% Q1 year-over-year surge — primarily due to an uptick in international conflicts.
Residential construction starts are in for a double-digit increase, with single-family set to exceed multifamily on wage and employment growth, which leads to more homebuyers.
Low interest rates will continue to make construction projects attractive financing prospects.
Construction activity will be a primary driver for the economy as a whole.

CMD Chief Economist Alex Carrick said the surge in construction activity is due to a buildup of delayed capital spending and that in the last several years, construction momentum has usually not been seen until later in the year.

According to CMD's March nonresidential construction starts report issued earlier this month, the total value of starts rose 18% from February to $28.5 billion, a noteworthy upward move, as the typical February-to-March increase is approximately 2.5%. All of the categories included in CMD's report showed positive month-to-month movement — institutional (27.2%), heavy engineering (20.7%) commercial (11.3%) and industrial (5.2%).

In a more tepid industry report, Dodge Data & Analytics reported that March construction starts fell 1% from February to 660.5 billion due to a poor nonbuilding (power plants, utilities, solar) showing. Dodge said that if this volatile category was removed from its calculations, March starts would have clocked in at a positive 4% growth.