It’s late November, which means it is market forecast season for the AEC industry. Construction outlook reports from the American Institute of Architects, Associated Builders and Contractors, ConstructConnect, Dodge Data & Analytics, and FMI are beginning to roll in. And if the early prognostications are any indication, 2018 is shaping up to be a little less rosy for the nonresidential and multifamily construction markets.
Dodge suggests the U.S. construction industry has shifted into a “mature stage of expansion.” The 11-13% annual growth in construction starts we witnessed in 2012-15 will slow to 4% in 2017 and 3% in 2018. ConstructConnect is calling for 2-3% growth in nonresidential building starts between 2018 and 2021. FMI is a bit more bullish: 5% growth in nonresidential construction spending in 2018, then 4-5% in 2019-21.
Despite the tepid outlook by construction economists—and numerous reports throughout 2017 that pointed to a looming growth slowdown for several major building sectors—optimism among AEC professionals has not waned. In fact, it has strengthened, according to a November 2017 survey of 356 architects, engineers, and contractors by Building Design+Construction.
While it has been an erratic and drama-filled first year for the Trump Administration, the vast majority of AEC professionals are not overly concerned that the Trump-led White House will negatively impact their businesses.
Six in 10 survey respondents predict that 2018 will be an “excellent” or “very good” business year for their firm. Barely half (50.3%) felt the same way this time last year, according to BD+C’s 2016 survey. Same for revenue forecasts: 62.0% predict their firm’s revenue will increase next year, and only 6.1% are calling for a drop in revenue. This is a markedly rosier outlook than last year’s, when 55.3% of respondents forecasted revenue growth and 11.5% anticipated a drop.
And while it has been an erratic and drama-filled first year for the Trump Administration—travel ban, Russian election interference probe, border wall financing fiasco, Paris Agreement withdrawal—the vast majority of AEC professionals are not overly concerned that the Trump-led White House will negatively impact their businesses. Just 16.6% of respondents cited “business impacts from the Presidential election” as a top-three concern heading into 2018. This sentiment is a somewhat dramatic turn from the post-election attitude, when nearly a third (31.7%) indicated that Trump was a major concern heading into 2017.
So, what are the top AEC business concerns for 2018? Competition from other firms (54.3%), general economic conditions (43.5%), price increases in materials and services (33.8%), and insufficient capital funding for projects (25.8%) top the list. Trump was at the bottom, along with avoiding benefit reductions, avoiding layoffs, and keeping staff motivated.
When asked about their top business development strategies for the next 12-24 months, respondents most often cited: an increase in marketing/PR efforts (47.4%), selective hires to increase competitiveness (46.3%), investment in technology (44.3%), staff training/education (43.5%), and launching a new service or business opportunity (38.0%). At the bottom: open a new office, strategic acquisition, and acquiring a new service or business opportunity.
Multifamily housing and senior living developments head the list of the hottest sectors heading into 2018, according to survey respondents. Well more than half (57.4%) indicated that the prospects for multifamily work were either “excellent” or “good” for 2018; 55.9% said the same for senior living work. Other strong building sectors: office interior/fitouts (55.2%), healthcare (50.1%), office buildings (44.5%), industrial/warehouses (44.1%), data centers (42.3%), and hotels/hospitality (41.3%). At the bottom of the list: religious/places of worship, sports/recreation, transit facilities, and cultural/performing arts buildings.
Related Stories
Apartments | Jan 26, 2024
New apartment supply: Top 5 metros delivering in 2024
Nationally, the total new apartment supply amounts to around 1.4 million units—well exceeding the apartment development historical average of 980,000 units.
Self-Storage Facilities | Jan 25, 2024
One-quarter of self-storage renters are Millennials
Interest in self-storage has increased in over 75% of the top metros according to the latest StorageCafe survey of self-storage preferences. Today, Millennials make up 25% of all self-storage renters.
Industry Research | Jan 23, 2024
Leading economists forecast 4% growth in construction spending for nonresidential buildings in 2024
Spending on nonresidential buildings will see a modest 4% increase in 2024, after increasing by more than 20% last year according to The American Institute of Architects’ latest Consensus Construction Forecast. The pace will slow to just over 1% growth in 2025, a marked difference from the strong performance in 2023.
Adaptive Reuse | Jan 23, 2024
Adaptive reuse report shows 55K impact of office-to-residential conversions
The latest RentCafe annual Adaptive Reuse report shows that there are 55,300 office-to-residential units in the pipeline as of 2024—four times as much compared to 2021.
Construction Costs | Jan 22, 2024
Construction material prices continue to normalize despite ongoing challenges
Gordian’s most recent Quarterly Construction Cost Insights Report for Q4 2023 describes an industry still attempting to recover from the impact of COVID. This was complicated by inflation, weather, and geopolitical factors that resulted in widespread pricing adjustments throughout the construction materials industries.
Multifamily Housing | Jan 15, 2024
Multifamily rent growth rate unchanged at 0.3%
The National Multifamily Report by Yardi Matrix highlights the highs and lows of the multifamily market in 2023. Despite strong demand, rent growth remained unchanged at 0.3 percent.
Apartments | Jan 9, 2024
Apartment developer survey indicates dramatic decrease in starts this year
Over 56 developers, operators, and investors across the country were surveyed in John Burns Research and Consulting's recently-launched Apartment Developer and Investor Survey.
Self-Storage Facilities | Jan 5, 2024
The state of self-storage in early 2024
As the housing market cools down, storage facilities suffer from lower occupancy and falling rates, according to the December 2023 Yardi Matrix National Self Storage Report.
Urban Planning | Dec 18, 2023
The impacts of affordability, remote work, and personal safety on urban life
Data from Gensler's City Pulse Survey shows that although people are satisfied with their city's experience, it may not be enough.
MFPRO+ News | Dec 11, 2023
U.S. poorly prepared to house growing number of older adults
The U.S. is ill-prepared to provide adequate housing for the growing ranks of older people, according to a report from Harvard University’s Joint Center for Housing Studies. Over the next decade, the U.S. population older than 75 will increase by 45%, growing from 17 million to nearly 25 million, with many expected to struggle financially.