According to a new report from the American Institute of Architects, the nonresidential building sector is expected to see a healthy rebound through next year after failing to recover with the broader economy last year.
The AIA’s Consensus Construction Forecast panel—comprising leading economic forecasters—expects spending on nonresidential building construction to increase by 5.4 percent in 2022, and accelerate to an additional 6.1 percent increase in 2023. With a five percent decline in construction spending on buildings last year, only retail and other commercial, industrial, and health care facilities managed spending increases.
This year, only the hotel, religious, and public safety sectors are expected to continue to decline. By 2023, all the major commercial, industrial, and institutional categories are projected to see at least reasonably healthy gains.
“The pandemic, supply chain disruptions, growing inflation, labor shortages, and the potential passage of all or part of the Build Back Better legislation could have a dramatic impact on the construction sector this year,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Challenges to the economy and the construction industry notwithstanding, the outlook for the nonresidential building market looks promising for this year and next.”
CLICK HERE TO VIEW INTERACTIVE CHART
More from AIA:
- The recovery in the broader economy in 2021 didn’t carry over to the nonresidential building sector. Spending on the construction of these facilities declined about 5%, on top of the 2% decline in 2020.
- The broader economy has seen a solid recovery since the depths of the pandemic-induced recession. It grew by about 5% last year and now has fully recovered from the past recession. There were almost 4 million net new payroll positions added last year, bringing national employment almost back to the level it was at in February 2020 prior to the pandemic. The national unemployment rate was 3.9% at the end of last year, just above the 3.5% rate in February 2020.
- In spite of these positive economic indicators, there are several headwinds to future economic growth. The uncertainty surrounding combatting Covid and its variants have added tremendous uncertainty to future building needs. The Biden Administration’s Build Back Better program was slated to add significant support to the construction sector, but its funding is very much in doubt at present (January 2022). Supply chain disruptions are likely to continue slow economic growth well into this year. Inflation accelerated during the second half of last year to its highest rate in almost four decades, which is expected to put upward pressure on interest rates. Finally, the already-serious labor shortages look to become even more severe this year and next.
- Industries throughout the economy are finding it challenging to retain their current employees and are having difficulty recruiting new ones. Most workers feel that jobs are plentiful, and therefore are increasingly comfortable leaving their current job in favor of searching for a better one. A recent survey of architecture firm leaders found that more than four in ten feel that recruiting architectural staff is a serious problem at present, and that it may create difficulties for the firm over the coming months given anticipated project workloads.
Related Stories
Market Data | Apr 9, 2021
Record jump in materials prices and supply chain distributions threaten construction firms' ability to complete vital nonresidential projects
A government index that measures the selling price for goods used construction jumped 3.5% from February to March.
Contractors | Apr 9, 2021
Construction bidding activity ticks up in February
The Blue Book Network's Velocity Index measures month-to-month changes in bidding activity among construction firms across five building sectors and in all 50 states.
Industry Research | Apr 9, 2021
BD+C exclusive research: What building owners want from AEC firms
BD+C’s first-ever owners’ survey finds them focused on improving buildings’ performance for higher investment returns.
Market Data | Apr 7, 2021
Construction employment drops in 236 metro areas between February 2020 and February 2021
Houston-The Woodlands-Sugar Land and Odessa, Texas have worst 12-month employment losses.
Market Data | Apr 2, 2021
Nonresidential construction spending down 1.3% in February, says ABC
On a monthly basis, spending was down in 13 of 16 nonresidential subcategories.
Market Data | Apr 1, 2021
Construction spending slips in February
Shrinking demand, soaring costs, and supply delays threaten project completion dates and finances.
Market Data | Mar 26, 2021
Construction employment in February trails pre-pandemic level in 44 states
Soaring costs, supply-chain problems jeopardize future jobs.
Market Data | Mar 24, 2021
Architecture billings climb into positive territory after a year of monthly declines
AIA’s ABI score for February was 53.3 compared to 44.9 in January.
Market Data | Mar 22, 2021
Construction employment slips in 225 metros from January 2020 to January 2021
Rampant cancellations augur further declines ahead.
Market Data | Mar 18, 2021
Commercial Construction Contractors’ Outlook lifts on rising revenue expectations
Concerns about finding skilled workers, material costs, and steel tariffs linger.