Slowing demand at architecture firms last year is expected to contribute to a projected 5.7% decline in construction spending for 2021, according to a new consensus forecast from The American Institute of Architects (AIA).
The AIA Consensus Construction Forecast Panel—comprised of leading economic forecasters—expects steep declines this year in construction spending on office buildings, hotels, and amusement and recreation centers. Health care and public safety are the only major sectors that are slated to produce gains in 2021.
Growth in nonresidential construction is expected for 2022, with 3% gains projected for the overall building market matched by both the commercial and institutional sectors.
“The December jobs report confirmed that the economy needs additional support in order to move to a sustainable economic expansion,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “As pandemic concerns begin to wane and economic activity begins to pick up later in 2021, there is likely to be considerable pent-up demand for nonresidential space, leading to anticipated growth in construction spending in 2022.”
CLICK CHART TO LAUNCH INTERACTIVE CHART FROM AIA
Here are some takeaways from AIA's Chief Economist Kermit Baker, Hon. AIA:
• Hotel, airlines, and recreation industry jobs have been decimated by the pandemic. "The December jobs report confirmed that the economy needs additional support in order to move to a sustainable economic expansion. Of particular concern were the 500,000 payroll positions lost in the leisure and hospitality sector. That means that this sector has lost almost 25% of payroll positions since February 2020, matching losses in the airline industry."
• The $900 billion stimulus package passed in December 2020 is not nearly enough to sustain economic growth. "Key elements of this package include another $600 in direct payments to qualifying individuals, $300 per week in supplemental unemployment insurance for up to 11 weeks, and $280 billion designated for the Paycheck Protection Program, which provided incentives for small businesses to keep employees on their payrolls. These initiatives were generally very effective in providing a safety net for impacted households and small businesses last spring. However, they weren’t designed to provide sufficient support for an extended period of economic weakness, and the December jobs report suggests that we may already be heading into another down cycle. Even this additional funding is unlikely to provide sufficient financial support for economic growth through the entire vaccination period, suggesting that even more stimulus will be needed in the coming months or else our economy likely will be in for an extended period of stagnant growth or modest declines."
• Biden win bodes well for infrastructure investment. "With the two Georgia senate seats now in the democratic column, there are a new set of policy options for the Biden administration. Still, given the razor thin margins in both the House and the Senate, programs likely to be enacted will need to have at least modest levels of bipartisan support. An infrastructure program is likely near the top of the list of programs that both parties could support, and the Biden Administration seems ready to make this a priority, in part because it would be viewed as a stimulus program, but also because borrowing costs are near historical lows."
• Architecture firms are seeing more positive signs for the long-term. "Project inquiries from prospective and former clients have been strong recently, suggesting that new work may be picking up. More concretely, new design work coming into architecture firms has generally been more positive than billings in recent months, suggesting that firms are bringing in more project activity than they are completing. However, firms are seeing different business conditions regionally. Firms in the northeast saw the steepest downturns as the pandemic hit, and conditions remained the weakest for the remainder of the year. Business conditions at firms in the other three regions – all modestly declining – are fairly comparable."
Related Stories
Sports and Recreational Facilities | Mar 15, 2023
Georgia State University Convocation Center revitalizes long-neglected Atlanta neighborhood
Georgia State University’s new Convocation Center doubles the arena it replaces and is expected to give a shot in the arm to a long-neglected Atlanta neighborhood. The new 200,000 sf multi-use venue in the Summerhill area of Atlanta is the new home for the university’s men’s and women’s basketball teams and will also be used for large-scale academic and community events.
Sponsored | Cladding and Facade Systems | Mar 15, 2023
Metal cladding trends and innovations
Metal cladding is on a growth trajectory globally. This is reflected in rising demand for rainscreen cladding and architectural metal coatings. This course covers the latest trends and innovations in the metal cladding market.
Education Facilities | Mar 15, 2023
DLR Group’s Campus Planning Studio defines new leadership
Linsey Graff named Campus Planning Leader. Krisan Osterby transitions to Senior Planner.
Building Tech | Mar 14, 2023
Reaping the benefits of offsite construction, with ICC's Ryan Colker
Ryan Colker, VP of Innovation at the International Code Council, discusses how municipal regulations and inspections are keeping up with the expansion of off-site manufacturing for commercial construction. Colker speaks with BD+C's John Caulfield.
Multifamily Housing | Mar 14, 2023
Multifamily housing rent rates remain flat in February 2023
Multifamily housing asking rents remained the same for a second straight month in February 2023, at a national average rate of $1,702, according to the new National Multifamily Report from Yardi Matrix. As the economy continues to adjust in the post-pandemic period, year-over-year growth continued its ongoing decline.
Affordable Housing | Mar 14, 2023
3 affordable housing projects that overcame building obstacles
These three developments faced certain obstacles during their building processes—from surrounding noise suppression to construction methodology.
Healthcare Facilities | Mar 13, 2023
Next-gen behavioral health facilities use design innovation as part of the treatment
An exponential increase in mental illness incidences triggers new behavioral health facilities whose design is part of the treatment.
Student Housing | Mar 13, 2023
University of Oklahoma, Missouri S&T add storm-safe spaces in student housing buildings for tornado protection
More universities are incorporating reinforced rooms in student housing designs to provide an extra layer of protection for students. Storm shelters have been included in recent KWK Architects-designed university projects in the Great Plains where there is a high incidence of tornadoes. Projects include Headington and Dunham Residential Colleges at the University of Oklahoma and the University Commons residential complex at Missouri S&T.
Mixed-Use | Mar 11, 2023
Austin mixed-use development will provide two million sf of office, retail, and residential space
In Austin, Texas, the seven-building East Riverside Gateway complex will provide a mixed-use community next to the city’s planned Blue Line light rail, which will connect the Austin Bergstrom International Airport with downtown Austin. Planned and designed by Steinberg Hart, the development will include over 2 million sf of office, retail, and residential space, as well as amenities, such as a large park, that are intended to draw tech workers and young families.
Performing Arts Centers | Mar 9, 2023
Two performing arts centers expand New York’s cultural cachet
A performing arts center under construction and the adaptive reuse for another center emphasize flexibility.