On the commercial side, growth will surge past a robust 2004. Total construction for offices, stores, and multifamily dwellings will rise 9%, to $120 billion, according to McGraw-Hill Construction. That tops the $112 billion spent at the peak of the dot-com bubble in 2000. Retailers will continue to add oodles of stores: Home-improvement giant Lowe's Cos. (LOW
) will open 150 outlets in 2005. And continuing its aggressive expansion, Wal-Mart Stores (WMT
) Inc. will build or expand up to 250 supercenters. "There's a sense that the economy is improving, and new construction will help these players catch the upturn," says Robert A. Murray, McGraw-Hill Construction's (MHP
) top economist.
Office building is also on the rebound. The national vacancy rate remains high: 17.4% at the close of 2004, down from 18.2% a year earlier. So while developers are planning new construction, they are being more selective. Many are still gun-shy after being saddled with acres of new space following the dot-com crash. So projects are increasingly prefinanced. As much as 70% is preleased in new buildings, up from 20% historically, according to Maria T. Sicola, a senior managing partner at real estate services firm Cushman & Wakefield Inc. Overall, 170 million square feet of offices will become available next year, up 10% from 2004. Stronger public finances will help boost public construction by 3% in the new year as well, according to the Manufacturers Alliance/MAPI. This follows a slow 2004, when weak public finances across the country stifled building of schools, roads, and public edifices.
With few weak spots expected in 2005, overall construction spending will rise 2%, to $585.5 billion, according to McGraw-Hill Construction. And home-builders remain bullish. Arlington (Tex.)-based D.R. Horton Inc. (DHI
) expects to sell over 50,000 homes this year, up 15% from 2004. Never mind interest rates, recessions, or wars, says CEO Donald J. Tomnitz, "we're going to make our goals in 2005." Quieter hammers, for now -- but not silent. By Brian Grow in Atlanta