Dodge: Expect construction starts to recover slowly in 2021

By |  November 10, 2020
Headshot: Richard Branch


Dodge Data & Analytics released its “2021 Dodge Construction Outlook,” offering construction industry forecasting and business planning intel.

The Dodge report predicts that total U.S. construction starts will increase 4 percent in 2021, to $771 billion.

“The COVID-19 pandemic and recession has had a profound impact on the U.S. economy, leading to a deep drop-off in construction starts in the first half of 2020,” says Richard Branch, chief economist at Dodge Data & Analytics. “While the recovery is underway, the road to full recovery will be long and fraught with potential potholes. After losing an estimated 14 percent in 2020 to $738 billion, total construction starts will regain just 4 percent in 2021.”

Uncertainty surrounding the next wave of COVID-19 infections in the fall and winter, plus delayed fiscal stimulus, will lead to a slow and jagged recovery in 2021, Branch adds.

“Business and consumer confidence will improve over the year as further stimulus comes in early 2021 and a vaccine is approved and becomes more widely distributed,” Branch says. “But construction markets have been deeply scarred and will take considerable time to fully recover. The dollar value of starts for residential buildings will increase 5 percent in 2021; nonresidential buildings will gain 3 percent; and nonbuilding construction will improve 7 percent. Only the residential sector, however, will exceed its 2019 level of starts thanks to historically low mortgage rates that boost single-family housing.”

Digging deeper

According to Dodge, the pattern of construction starts for more specific segments is as follows:

• The dollar value of single-family housing starts will be up 7 percent in 2021, and the number of units will grow 6 percent. Historically low mortgage rates and a preference for less dense living during the pandemic are clearly overpowering short-term labor market and economic concerns, Dodge says.

• Multifamily construction will pay the price for single family’s gain. The large overhang of high-end construction in large metro areas, combined with declining rents, will lead to a further pullback in 2021. The dollar value will drop 1 percent, Dodge forecasts, while the number of units started falls 2 percent to 484,000.

• The dollar value of commercial building starts will increase 5 percent in 2021. Warehouse construction will be the clear winner, as e-commerce giants continue to build out their logistics infrastructure, according to Dodge. Office starts will also increase due to rising demand for data centers, as well as renovations to existing space. Retail and hotel activity will languish, though.

With five of the nation’s 13 most populous cities residing in Texas, demand for construction materials in the Lone Star State is, not surprisingly, very high. Photo: Art Wager/iStock / Getty Images Plus/Getty Images

According to Dodge Data & Analytics, public works construction starts will see little improvement as 2021 begins. Photo: Art Wager/iStock / Getty Images Plus/Getty Images

• In 2021, institutional construction starts will increase by a tepid 1 percent as growing state and local budget deficits impact public building construction. Education construction is expected to see further declines in 2021, as well, while health care starts are predicted to rise as hospitals seek to improve in-patient bed counts.

• The dollar value of manufacturing plant construction will remain flat in 2021. Declining petrochemical construction and weak domestic and global activity will dampen starts, while a small handful of expected project groundbreakings will level out the year.

• Public works construction starts will see little improvement as 2021 begins due to continued uncertainty surrounding additional federal aid for state and local areas, Dodge says. Additionally, the unfinished appropriations process for fiscal year 2021, which began Oct. 1, raises doubt on the sector’s ability to post a strong gain in 2021, the firm says. Public works construction starts will be flat over the year.

• Electric utilities and gas plants will gain 35 percent in 2021, led by expected groundbreakings for several large LNG export facilities and an increasing number of wind farms.

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About the Author:

Kevin Yanik is editor-in-chief of Pit & Quarry. He can be reached at 216-706-3724 or

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