Last year’s boon in single-family housing construction will have an impact on the availability and cost of building materials for nonresidential construction in 2021, which is expected to be a year of “decreasing work volume,” according to JLL’s latest Construction Forecast being released today.
Nonresidential starts were down 24% last year, and are expected to decline again in 2021. Yet, JLL sees an industry that has become more resilient and better positioned to function during the pandemic recovery.
Healthcare and industrial should be the growth winners in construction spending this year. Chart: JLL
This recovery won’t be like the last one during the Great Recession in the late 2000s. For one thing, the range between sector forecasts is wider.
JLL analyzed three indicators of future growth: construction starts, construction industry sentiment, and forecast construction spending across nine nonresidential sectors. The clear winners, in its estimation, will be distribution and healthcare. The clear stragglers: hotels and entertainment. The office sector shows the least consensus.
LUMBER PRICING WILL CONTINUE TO BE VOLATILE
The boon in new-home construction is having an impact on overall construction costs. Chart: JLL
In addition, this has not been a total construction shutdown. Single-family housing starts increased by 11% last year, and have continued to grow since last May. (According to the latest Census Bureau estimates, single-family starts in January, at an annualized rate of 1,269,000 units, were up 29.9% over the same month in 2020.)
Residential construction employment was also up last year, by 1.2%, while nonres construction employment dipped 3.9%. That growth is affecting labor and materials markets. “The growth in residential is the primary cause of our forecast for elevated cost inflation in the coming year,” states JLL.
This year, it predicts that construction cost increases will be in the higher range between 3.5% and 5.5%. Labor costs will be up in the 2-5% range. Material costs will rise 4-6% and volatility “will remain elevated.” Nonres construction spending will stabilize from the early stages of the pandemic, but still decline between 5% and 8%, although JLL foresees an upswing in the third and fourth quarter, and more typical industry growth in 2022.
One silver lining from the pandemic is that it “spurred three years of construction tech adoption to be condensed into the last nine months of 2020,” observes JLL. It cites a recent Associated General Contractors survey that found contractors planning to increase their spending for all 14 ConTech categories listed.
Labor demand should also continue, although the key to any construction recovery, states JLL, will be how quickly the population is vaccinated against COVID-19. The industry’s labor shortage was a big enough buffer to absorb some of the pandemic’s shock, and through the entire post-pandemic period “there have been more active job openings in construction than at the peak of the last expansion in 2006-2007.”
As for materials pricing, volatility will affect lumber, plywood, copper and brass mill shapes. The least volatile, price-wise, should be concrete, flat glass, insulation, and plastic construction products.
Lumber and plywood pricing is expected to remain unpredictable. Chart: JLL
NEW ADMINISTRATION COULD SHAKE UP CONSTRUCTION
JLL weighed in on the potential impact of the Biden Administration on the construction industry. The next stimulus package, if passed by Congress, should keep the economy’s growth from reversing. A large infrastructure bill “is a good possibility later this year,” which JLL thinks could be an “accelerant” to construction inflation.
Interestingly, JLL doesn’t think either a reduction in immigration restrictions or an increase in the minimum wage to $15 per hour would have a substantive impact on projects, wages, or costs, except in states like Texas where construction wages are lower than the federal rate.
Related Stories
University Buildings | Oct 27, 2022
The Collaboratory Building will expand the University of Florida’s School of Design, Construction, and Planning
Design firm Brooks + Scarpa recently broke ground on a new addition to the University of Florida’s School of Design, Construction, and Planning (DCP).
Building Team | Oct 26, 2022
The U.S. hotel construction pipeline shows positive growth year-over-year at Q3 2022 close
According to the third quarter Construction Pipeline Trend Report for the United States from Lodging Econometrics (LE), the U.S. construction pipeline stands at 5,317 projects/629,489 rooms, up 10% by projects and 6% rooms Year-Over-Year (YOY).
Data Centers | Oct 25, 2022
Virginia county moves to restrict the growth of new server farms
Loudoun County, Va., home to the largest data center cluster in the world known as Data Center Alley, recently took steps to prohibit the growth of new server farms in certain parts of the county.
Museums | Oct 25, 2022
Seattle Aquarium’s new Ocean Pavilion emphasizes human connection to oceans
Seattle Aquarium’s new Ocean Pavilion, currently under construction, features several exhibits that examine the human connection with the Earth’s oceans.
Energy-Efficient Design | Oct 24, 2022
Roadmap shows how federal buildings can reach zero embodied carbon emissions by 2050
The Rocky Mountain Institute (RMI) has released a roadmap that it says charts a path for federal buildings projects to achieve zero embodied carbon emissions by 2050.
Higher Education | Oct 24, 2022
Wellesley College science complex modernizes facility while preserving architectural heritage
A recently completed expansion and renovation of Wellesley College’s science complex yielded a modernized structure for 21st century STEM education while preserving important historical features.
Transportation & Parking Facilities | Oct 20, 2022
How to comply with NYC Local Law 126 parking garage inspection rules
Effective January 1, 2022, New York City requires garage owners to retain a specially designated professional engineer to conduct an assessment and file a report at least once every six years. Hoffmann Architects + Engineers offers tips and best practices on how to comply with NYC Local Law 126 parking garage inspection rules.
Architects | Oct 20, 2022
Michael Graves Architecture acquires Jose Carballo Architectural Group
Michael Graves Architecture (MG), an award-winning global leader in planning, architecture, and interior design based in Princeton, NJ, announces the acquisition of Jose Carballo Architectural Group (JCAG), a New Jersey-based architecture firm.
Architects | Oct 20, 2022
Woolpert acquires Sheehan Nagle Hartray Architects, global experts in mission critical design
Woolpert has acquired Sheehan Nagle Hartray Architects, a full-service architecture firm that specializes in mission critical and technically challenging projects, interior design and predesign services for commercial, civic and education clients. SNHA has offices in Chicago and London.
Mixed-Use | Oct 20, 2022
ROI on resilient multifamily construction can be as high as 72%
A new study that measured the economic value of using FORTIFIED Multifamily, a voluntary beyond-code construction and re-roofing method developed by the Insurance Institute for Business & Home Safety (IBHS), found the return can be as high as 72%.