Both Basu and Simonson have high hopes for nonresidential and nonbuilding construction in 2024. Residential construction is proving to be more of a mixed bag.
“Residential construction employment has continued to go up almost every month,” Simonson says. “It signifies that the single-family decline is nowhere near as prolonged or bad as it was in 2005 to 2011. But multifamily, while it looks great now with a record number of units under construction, the number of starts and permits dropped 30 percent or more year over year. I think that situation remains more positive, for the moment, than I expected. But I do expect a big downturn in multifamily.”
Basu’s outlook for the residential sector is slightly more positive.
“Despite the utter lack of affordability, demand for homes exceeds supply,” Basu says. “That has been a boon for the new home market. New home sales are up 31 percent over the past year and have risen during eight of the past 10 months. Authorizations for new residential construction have slowed from the peak at the end of 2021 but, as of August 2023, remained higher than in any month between 2008 and the end of 2020. Residential construction will remain relatively strong throughout 2024 despite the potential for a slight interest rate-caused lull.”
Nonresidential construction, specifically driven by subsets such as manufacturing, data centers and others, is an area both Basu and Simonson expect to thrive in 2024.
“Manufacturing-related construction spending has surged nearly 50 percent through the first eight months of the year and is up approximately 170 percent since the end of 2020 due to public incentives and microprocessor-focused megaprojects,” Basu says. “The industrial segment was expected to be strong during 2023, but the rapidity with which spending has occurred exceeds even the most bullish forecasts.”
Simonson expects increased disbursement in funding from the Infrastructure Investment & Jobs Act (IIJA) in 2024. He points out that while very few highway contractors say they are working on IIJA-funded projects, water and sewer projects ramped up thanks to the act.
“So much of that money is through the state revolving funds, which were already a well-working mechanism and had many more projects teed up and ready to go if they could get funding,” Simonson says. “That’s been a very strong growth category, and I attribute that to the IIJA. There’s still a very strong prospect of more things, and I think 2024 will show more of that showing up in orders and construction put in place.”