Economy Watch: Positive Outlook for Nonresidential Construction in 2018

The Dodge Momentum Index ended 2017 on a high note, which bodes well for construction activity this year.

Source: Dodge Data & Analytics, Dodge Momentum Index, December 2017
Source: Dodge Data & Analytics, Dodge Momentum Index, December 2017

Developers are still planning projects with considerable gusto, so it’s likely that 2018 will be a strong year for nonresidential development, reports Dodge Data & Analytics.

The company’s Dodge Momentum Index was up 3.6 percent in December to 153.9 (2000 = 100) from the November reading of 148.6. The index is a monthly measure of the first report for nonresidential building projects in planning, which lead construction spending for nonresidential buildings by about a year.

December’s increase was due to an 8.6 percent jump in the institutional component of the Momentum Index, while the commercial component eked out a 0.7 percent gain, Dodge noted. For the full-year 2017, the Momentum Index averaged 132.3, up 10.7 percent from the full-year average in 2016, with similar improvement for the commercial sector (up 11.4 percent) and the institutional sector (up 9.7 percent).

After retreating during the third quarter of 2017, the Momentum Index returned to its upward track during fourth-quarter 2017, putting December’s reading up 20.9 percent compared to the same month a year ago. The continued strengthening of the Momentum Index in 2017 suggests that nonresidential building construction activity will advance further during 2018, Dodge explained.

In the institutional sector, the leading projects in December were a $200 million renovation of the Smithsonian Institute Visitor Center (The Castle) in Washington D.C. and a $175 million Veterans Affairs Living Center in Long Beach, Calif. The leading commercial projects were a $100 million hotel on Harvard University’s campus in Allston, Mass., and a $100 million office building in Little Rock.