In today’s construction news, learn about expansion in all significant segments. The US construction industry started 2024 on a positive note. Although many categories seem ready for additional growth, the industry is not likely to duplicate its overall gains. On the other hand, on March 11, the Idaho Transportation Department will start preliminary work to replace two interchanges on U.S. Highway 20 in Rexburg. The University Boulevard (Exit 332) and State Highway 33 (Exit 333) interchanges will be reconstructed this summer to improve safety and efficiency.
The US Construction Outlook for 2024
Original Source: THE 2024 US CONSTRUCTION OUTLOOK: TORRID OR TEPID?
The US construction industry started 2024 strong in all main sectors. Some categories may rise, but the industry is unlikely to duplicate its overall gains.
On February 1, the US Census Bureau announced that December 2023 construction spending rose 0.9 percent at a seasonally adjusted annual rate (SAAR) from November and 14 percent from December 2022. (Statistical seasonal adjustment removes volatility owing to periodic differences across months, such as weather or holiday patterns. Data presented annually facilitates comparison with full-year totals.
Since no deflator accounts for project cost, these values are in current USD. Even in real (inflation-adjusted) terms, the year-over-year gain appears large, especially given the recent quick cooling of price increases.
Year-over-year gains were practically universal across project categories. Residential construction spending surged by 7%, with single-family homebuilding up 10%, multifamily construction up 12%, and owner-occupied housing improvements up 2%.
The impressive 20% increase in nonresidential building spending was split almost evenly between private (19%) and public (22%). In Census Bureau press releases, all 16 categories grow.
However, residential and certain nonresidential categories may change by 2024. Residential single-family spending is strong, contrasting with dismal first-half 2023 data. The shock of significant mortgage-interest rises made monthly payments too expensive for most first-time home buyers and led existing homeowners to “rate lock” their low-rate mortgages.
Mortgage rates ceased rising in 2023 and are constant, but higher than before. In addition, many builders give incentives—usually a payment to lower the loan rate—that make new houses more accessible. Thus, single-family homebuilding should rise somewhat in 2024 compared to 2023.
Multifamily construction may fare worse. Annual spending peaked in August and then stagnated. The number of December construction units was 10% lower than December 2022. Even worse, prospective unit permits dropped 27% year-over-year.
Although rents are declining in many regions, higher interest rates and tougher lending rules are raising expenses for developers. These considerations suggest a double-digit multifamily spending reduction in 2024.
Finance and rent squeezes are also hurting nonresidential, income-dependent property developers, especially offices. Though occupancy rates are higher midweek and lower on Mondays and Fridays, many office tenants still see only half their staff coming to work. Firms are offering subleases and wanting less space when leases expire. These factors have crushed demand for new office development, which may drop by double-digit percentages in 2024 and beyond.
Online merchants and vendors are significantly decreasing warehouse space need. Online shopping growth has slowed. Retailers may now receive deliveries “just in time” and don’t have to hoard as many things “just in case” thanks to smooth supply chains. Warehouse building spending peaked in August and declined by 9% during the next four months, ending the year below December 2022. More slippage is predicted in 2024.
The Census Bureau lists spending for 11 categories of retailers, parking structures, and drinking and dining facilities but not retail building. These parts spent nearly the same on construction in December 2022 and 2023. Retail construction continues in places with growing populations or remote workers. Retail activity is declining in underutilized workplaces and diminishing neighborhoods. These patterns suggest 2024 retail construction will be patchy.
Demand for other nonresidential structures should exceed these negative or dubious categories. Manufacturing construction growth was the fastest in 2023, at $81 billion, or 61%, from December 2022 to December 2023. This rise was about $68 billion from “computer/electronic/electrical manufacturing” according to the Census Bureau. Many semiconductor-fabrication factories (fabs) are included. Arizona, Texas, and Ohio factories built before 2022 are still under construction. They now include Kansas, Idaho, and Utah plants.
A number of EV, battery, and component plants are being built or will be in 2024. Other firms are opening or expanding US plants to avoid war zones, simplify supply chains, qualify for orders from projects that require US-made materials and components, or serve new markets like hydrogen-fuel generation and carbon capture and storage. Manufacturing construction may rise again in 2024 for these reasons.
Power construction is another huge, fast-growing business. December spending was 24% higher than last year. Solar and onshore wind energy, transmission lines in some places, and utility-scale batteries are growing. Offshore wind power, which was expected to increase rapidly, is unlikely to contribute much in 2024. Many projects have been canceled or face financial, logistical, and regulatory issues. This affects all energy projects to variable degrees, making 2024 power investment timing and magnitude unclear.
Data centers are always in demand, making data-center building a hot business. Data center demand is expected to rise in the next years due to the popularity of AI, especially GenAI. Unfortunately, the Census Bureau records data-center spending as office construction. Thus, it’s hard to assess data-center spending growth or office development decline.
Many “traditional” data-center markets, like northern Virginia’s, are confronting electricity shortages and local opposition. These obstacles have led owners to seek more varied data center locations, not slow construction.
As in 2023, public project investment is expected to rise at the same rate as private development. Highway and street construction, the largest public sector, rose 26%. Other infrastructure sectors gained. Airports, transit, and passenger rail received 9% more public funding. Spending on sewage and trash disposal rose 23%. Water-supply projects grew 20%. River and harbor conservation and development spending jumped 22%.
These projects received funding from the trillion-dollar federal Infrastructure Investment and Jobs Act (IIJA), passed in November 2021. Few contractors have won IIJA-funded projects, thus little of the rise in highway spending appears to be due to that statute.
IIJA funding regulations are still unclear. In addition to “Buy America” material standards, apprenticeship programs and wage rates have changed. However, IIJA funding should increase spending in each category in 2024.
Education and medical construction, two public-private sectors, have mixed prospects in 2024. Primary and secondary schools get two-thirds of educational infrastructure spending, mostly from property taxes and managed by local school districts. College and university construction investment is about one-third private, funded by philanthropic donations, tuition, and student fees.
Construction spending for basic and secondary schools jumped 17% from December 2022 to December 2023, while higher education spending rose 15%. Many school districts have profited from rising residential property values and new residential and/or taxable nonresidential structures. This has permitted school construction, expansion, and restoration, which may continue in 2024. College and university enrollments are declining, leaving many institutions with little motive or money to develop or remodel. Thus, higher-ed spending may drop in 2024.
The Census Bureau tracks hospital, medical office, and clinic construction. Three-fourths of their funding comes from private sources, while public bodies often contribute.
From December 2022 to December 2023, hospital construction outlays rose 13%, medical building outlays 19%, and special care 2 percent. These totals likely reflect the rebound from the first year of the pandemic, when hospitals halted building to treat COVID patients and many temporary facilities were built for diagnosis and treatment. Hospitals are rebuilding and special-care units are closing.
In the medium to long term, more care will be provided in offices and other facilities outside of hospitals, and hospital numbers will decline. Whether these trends will affect construction spending in 2024 is unknown.
Many contractors’ biggest issue is finding suitable people to build these projects. At the end of December, the BLS reported 374,000 unfilled construction jobs. That exceeded the 227,000 positions the industry filled in the month, indicating that contractors wanted to hire more than twice as many people as they could.
The worker shortage means corporations must pay more to attract and retain workers. Average hourly earnings (AHE) for production and nonsupervisory employees has risen at a steady 5-to-6-percent rate for the past two years, while AHE for the overall private sector cooled from 6.5 percent in July 2022 to 4.3 percent in January. This pay metric is expected to climb 5–7% in 2024.
The industry escaped substantial material price rises in 2023. The Producer Price Index (PPI) for materials and services used in new nonresidential construction fell throughout most of 2023 after rising at a 20% or higher annual pace for 12 months from mid-2021 to mid-2022. Concrete prices have continuing to grow, while gypsum wallboard prices are rising again. Four- to six-percent annual increases are possible.
In conclusion, 2024 will certainly see US construction sector growth, but with big demand adjustments. Multifamily construction will fall sharply, but single-family homebuilding will rise. Retail and higher education are uncertain, while office and warehouse building is dismal. These drawbacks may be offset by rapid development in industry, data center, school, infrastructure, and power facility construction. However, many project timings are unclear. Worker shortages will remain, and wages and materials will likely rise more than in 2023.
US-20 interchange Construction in Rexburg Begins Next Week
Original Source: Early construction activities begin next week for US-20 interchanges in Rexburg
On March 11, the Idaho Transportation Department will start early construction to rebuild two Rexburg U.S. Highway 20 interchanges. This summer, University Boulevard (Exit 332) and State Highway 33 (Exit 333) interchanges will be reconstructed for safety and efficiency.
Utility improvements and temporary traffic lights at Exit 333 will help traffic flow during construction this spring. Staff will also install permanent signals at Salem Highway ramps north of Exit 337. When possible, early actions will close lanes at off-peak times.
“We anticipate maintaining at least one lane of traffic in each direction on University Boulevard and SH-33 between March and June,” Project Manager Conner Huffaker stated.
This summer’s construction will close each interchange individually. University Boulevard interchange closure is expected in June. August should see the SH-33 interchange closed. The detour route will stay open while one interchange is under development. USA-20 will remain available to through traffic during construction.
Crews expect to finish by late October.
After completion, both interchanges will be diverging diamond interchanges. After years of technical data analysis and community consultation, the DDI design was adopted. Learn how to drive via the new interchanges in this video.
ITD will hold an open house at Madison High School from 4 to 6 p.m. on April 2 to discuss construction plans and implications. More information will be online then.
Contractor HK Contractors is handling this $22 million project.
Summary of today’s construction news
In summary, the US construction industry is expected to rise overall in 2024, although there will be significant changes in demand. A sharp fall in multifamily construction will be more than offset by a small to moderate growth in single-family homebuilding in the residential sector. The future of non-residential categories is uncertain for retail and higher education and grim for office and warehouse buildings.
On the other hand, every interchange will need to be completely closed, one at a time, during construction this summer. June is when the interchange at University Boulevard is expected to be completely closed. August is when the interchange at SH-33 is expected to close completely. The other interchange will continue to operate as a detour route while the first is closed for construction. During construction, US-20 will continue to be accessible through traffic.
