UHERO forecast: After pullback, construction prospects firm

Following two years of decline, the pace of building in Hawaiʻi has stabilized. The value of construction permits is posting healthy gains across all sub-sectors this year, and projects either planned or in the pipeline will maintain construction activity near its current level through the end of the decade.

• The industry continues to produce both low and high rise residential structures at a steady pace. On Oʻahu, condo building has spread from Kakaʻako to Ala Moana, and next year Koa Ridge will join Hoʻopili in single-family home construction. Residential building on the neighbor islands is proceeding at a more restrained pace.
• Sales of existing homes have slowed a bit on Oʻahu and Hawaiʻi Island, consistent with early signs of national real estate cooling. However, sales gains are being recorded on Maui and Kauaʻi.
• Continuing strong performance of the tourism industry will sustain relatively high levels of resort renovation and new development.
• The public sector will continue to provide important support for the construction industry. Large scale projects include renovations and expansions of airports, roads and public utilities.
• As activity in the industry has retreated from its peak, price pressures have eased, and construction costs posted an outright decline in the first half of this year. But solid national demand for building materials, import tariffs, and rising energy prices will push construction costs higher in coming years.
• Following two years of decline, real income and employment in the industry will begin to edge higher next year.
• With the economic upswing in its eighth year, the downside risks are material, even if a recession is not yet in sight. Uncertainty about government policy and the business environment may weigh on investment plans. At the same time, persistently buoyant U.S. economic conditions could support stronger than anticipated construction growth.

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