Construction is starting to pick up as interest rates fall, Dodge says

The dollar value of construction starts is projected to increase 9% in 2025, and close 8% in 2024, Dodge Construction Network predicts.

Richard Branch, Chief Economist, presented next year’s forecast entitled ‘The impact of lower rates on the construction sector to 2025’ on 14 November. Interest rates have started to fall and, barring a pick-up in inflation, Branch expects a further cut in December. . Total starts are expected to reach $1.18 trillion in 2024 and $1.28 trillion by the end of 2025.

In the residential sector, multi-family housing starts are expected to increase 11% in the number of units in 2025 after falling 10% in 2024. Single-family housing starts will increase 15% by the end of this year , according to Dodge, with another 5 percent increase expected by 2025. Much of that growth is occurring in “sun belt” states, Branch says, such as Texas, Nevada, New Mexico and Arizona, as people are looking to buy homes in more affordable areas.

Commercial starts are expected to increase by 5% in 2024 and another 7% in 2025. Retail and hotel construction, two sectors hit hard by the COVID-19 pandemic, are on the rise. Retail starts are forecast to end 5% this year before rising 17% next year, while hotel starts are expected to rise 31% this year, with another 16% expected in 2025. Data center construction also remains a bright spot. will increase by 57% in 2024 and a 24% increase is expected in 2025.

A weak spot in the retail sector is warehouse construction, Branch says, in large part because of Amazon’s construction halt in 2023 after several years of high activity. By 2024, starts are down 8%, with an additional 1% drop expected next year.

Institutional starts are up 16% this year and are expected to rise 4% next year, with an increase in project starts in both the hospital and education markets. In the non-construction sector, the beginnings of highways and bridges continue to be reinforced with federal funds. Dodge reports a projected 22% increase in bridge construction this year and an additional 11% increase in 2025. Highway starts will increase 12% in 2024 and are expected to increase 14% l next year