By the Association of Equipment Manufacturers
Roadbuilders and their suppliers can expect a banner year in 2024, with industry experts projecting record spending on infrastructure projects thanks to the bipartisan Infrastructure Investment and Jobs Act of 2021 (IIJA).
IIJA FUNDING
For fiscal year 2024, the Federal Highway Administration has allocated $61 billion for 12 formula programs to support investment in critical infrastructure, including roads, bridges, tunnels, carbon- emission reduction and safety improvements. Funding from the IIJA will help all 50 states, the District of Columbia and Puerto Rico to increase the efficiency of the nation’s transportation system. The infrastructure bill will help public-sector construction projects outpace the private sector again in 2024, according to Richard Branch, chief economist at Dodge Construction Network. Branch projects the total value of construction starts in 2024 to rise 7 percent to $1.206 trillion after climbing 1 percent in 2023.
DOUBLE-DIGIT GROWTH
Highway and bridge construction is expected to increase 23 percent to $147.1 billion this year, the largest gain of any construction sector, Branch said. That follows a 14 percent increase to $119.5 billion in 2023, he said.
“The dollars flowing from the infrastructure act are coursing into the system and causing double-digit growth across most of our infrastructure categories, whether it’s highways, bridges, water or sewer,” he said. “There’s really tremendous opportunity in the infrastructure markets. Publicly funded construction did rather well last year, and I continue to think that the public side of the market will outgrow the private side.”
TRANSPORTATION CONSTRUCTION
The IIJA funded many projects that are now in the construction phase, and many states have stepped up their investment in transportation infrastructure through bond issues, business taxes, general-fund transfers and user-fee increases, according to Alison Premo Black, chief economist for the American Road & Transportation Builders Association.
The total value of transportation construction work in the United States this year will grow 14 percent to $214 billion, Black said. That figure includes spending on airport terminals and runways; bridge and tunnel work; public transit and rail construction; and ports and waterways.
Black said spending on highway and bridge construction in 2024 will rise 16 percent to $152.3 billion, following a 15 percent increase in 2023. Activity in the transportation construction market is expected to increase or remain flat in 38 states this year, with Texas, Florida, Georgia and New York among the strongest markets, she said.
Highway work is projected to rise 15.9 percent this year after climbing 16.4 percent in 2023, while bridge construction will surge 17.3 percent in 2024 after experiencing an 8.2 percent boost in 2023, Black said.
LABOR & MATERIALS CHANGING APPROACH
Uncertainties surrounding the costs of labor and materials likely will lead operating stakeholders to consider retrofitting and modernizing bridges rather than building new ones, according to Misha Nikulin, managing director in the industrial products and construction division at Deloitte Consulting.
“Material-cost increases will drive more creativity in design and construction, including more creative modularization and prefab,” he said. “With growth in sustainability projects, opportunities with ‘green concrete’ will be explored more for roads and highway considerations.”
OTHER SECTORS
Nikulin said robust growth in other construction sectors will lead to “more localized road projects” to support new facilities in 2024. Construction starts on environmental and public-works projects, for example, are expected to climb 10 percent this year to $83.1 billion, according to Dodge Construction Network. That’s on top of a 16 percent gain in 2023.
Other construction sectors projected to see strong growth in 2024 include hotels and motels (17 percent), manufacturing (16 percent), multifamily housing (14 percent), single-family housing (9 percent) and stores and shopping centers (9 percent), according to Dodge.
POTENTIAL GOOD NEWS FOR INTEREST RATES
High interest rates are weighing down the construction industry, especially private-sector projects, but the Federal Reserve likely is done raising rates now that inflation appears to be under control, Branch said. Modest interest-rate cuts could begin as early as July and continue at a measured pace through 2026, lowering borrowing costs and fueling construction activity, he added.
“We all know that the construction sector is one of the most interest-rate-sensitive sectors in this economy,” Branch said. “These high interest rates will keep growth, particularly in the private side of the market, subdued for 2024. That easing of monetary policy is going to be very slow and methodical. They’re going to take their sweet time to make sure they’ve truly got that inflation monster beat down.”
Reprinted from Marine Construction Magazine, Issue I, 2024.
