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North America 2018
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World Cement
Construction trends
The totals mask disparate trends among types of
construction. Throughout 2016 and 2017, residential
construction – new, single, and multifamily along with
additions and major renovations to existing properties
– accounted for the bulk of construction growth. Total
residential spending increased 11% in 2017 as a whole
but ended the year far below its February 2006 peak.
Private non-residential construction, which
covers a wide range of commercial, industrial, and
institutional categories, slowed to a 1% increase
in spending from 2016 − 2017, after setting new
highs in mid-2017, following five years of generally
strong gains. By late 2017, private non-residential
spending was slipping below the previous year’s
levels.
In contrast, public construction, which lagged
in spending levels through most of 2016 and 2017,
turned positive at the end of last year through
January 2018. Nevertheless, public investment in
construction remained well short of its 2009 and
2010 highs.
With those disparate trends at the end of 2017,
how is 2018 likely to turn out? Similarly overall
but with quite different results from last year by
segment. However, there are numerous policy
uncertainties that could substantially change the
outcome for each segment.
Housing: still positive
Residential construction has a pair of fairly reliable
leading indicators: starts and permits. Each month,
the Census Bureau reports on the number of units
started and the number of residential building
permits issued to builders. But not all permits turn
into starts, especially for multifamily projects.
The time from start to completion can also vary.
Moreover, these series are subject to large revisions.
Thus, the indicators are far from solid.
With those caveats in mind, early indications are
that single-family homebuilding will continue to
increase at close to double-digit rates in 2018, while
multifamily spending is likely to flatten out. There
are still some very expensive, high-rise apartment
buildings under construction in large cities, but
the overall number of multifamily units that began
construction in 2017 was less than in 2016, making
a decline in spending likely, once these exceptional
projects wrap up.
Faster-growing segments
Private non-residential spending was dragged down
in 2017 by a decline in the largest subcategory
— power — and by an even steeper drop in
manufacturing construction. Both segments appear
poised for turnarounds.
Power construction, as defined by the Census
Bureau, includes every form of power generation
(coal, nuclear, and gas-fired plants, as well as wind,
solar, and other renewable sources), transmission,
and local distribution. In addition, the Census
Bureau includes any construction at an oil or
gas well site, other than the well itself (which is
counted in mining activity) and also oil and gas
pipelines. In 2017, the Federal Energy Regulatory
Commission approved numerous pipelines, the
construction of which should boost spending
totals in 2018. An expanding gas pipeline network,
meanwhile, is spurring construction of more
gas-fired power plants. Ever-larger solar and wind
‘farms’ will also push up the power construction
total in 2018 and beyond.
Several factors are contributing to a rise in
manufacturing construction. A new round of
multibillion-dollar petrochemical projects is
under way, ranging from Shell’s ethane cracker in
Pennsylvania, to natural-gas liquefaction ‘trains’
for exporting liquefied natural gas. Motor vehicle
and electronics manufacturers are expanding,
modernising, and building new plants for cars,
light and heavy trucks, batteries and tyres, and
electronic components to enable autonomous
vehicles. Foxconn has begun construction of a huge
consumer-electronics plant in Wisconsin, while
Tesla’s battery “gigafactory” in Nevada has drawn
other manufacturers to that vicinity.
Unchanged or weaker segments
The second-largest private non-residential category
is what the Census Bureau calls commercial
construction. As with power, commercial
construction has a meaning that is probably unique
to the Census Bureau, comprising retail, warehouse,
and farm construction.
Despite a record number of store closings
announced last year, retail construction was
roughly flat until a recent decline. There was little
construction of new standalone stores or shopping
centres, but many new high-rise apartment and
office buildings include a retail component. In
addition, malls spent to renovate and rejuvenate
their existing space.
But the biggest contributor to growth in
commercial construction was warehouse spending,
which jumped more than 30% in 2017. This rocket
was propelled by giant distribution centres for
Amazon and other online retailers; smaller ‘click
and collect’ points inside metro areas, where buyers
could order in the morning and receive same-
day deliveries or pick up items themselves; and
self-storage facilities. In 2018, warehouse growth is
likely to continue, albeit at a less frantic pace, while
retail construction shrinks as chains close still more
stores.
Other major private categories include offices,
health care, transportation, and lodging. Office
construction slowed from double-digit gains to nearly
static by late 2017, as major projects wrapped up in