Despite labor shortages and rising material costs that continue to impact the construction sector, construction spending for nonresidential buildings is projected to increase 4.0% this year and continue at a 3.9% pace of growth through 2019.
The American Institute of Architects (AIA) semi-annual Consensus Construction Forecast indicates the commercial construction sectors will generate much of the expected gains this year, and by 2019 the industrial and institutional sectors will dominate the projected construction growth.
“Rebuilding after the record-breaking losses from natural disasters last year, the recently enacted tax reform bill, and the prospects of an infrastructure package are expected to provide opportunities for even more robust levels of activity within the industry,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The Architecture Billings Index (ABI) and other major leading indicators for the industry also point to an upturn in construction activity over the coming year.”
CLICK TO VIEW INTERACTIVE CHART
Even eight and a half years into this current national economic cycle, the US economy remains on solid footings. Given the strong levels of business investment, economic growth is estimated to have been 2.2% to 2.3% range last year, easily topping the 1.5% growth from 2016. Over two million new payroll positions on net were added to the economy last year, the seventh straight year that payroll growth exceeded that level.
The national unemployment rate ended the year at 4.1%, its lowest level since 2000. And while low interest rates have helped to fuel this growth, rising stock prices have ensured that public companies have had access to capital to expand their operations. The Dow Jones industrial average increased almost 25% during the year.
However, in the face of a supportive economy, construction spending on nonresidential buildings disappointed last year. Overall spending on these facilities grew by only about 2.5%, with spending on manufacturing facilities seeing a steep double-digit decline.
The only sector achieving healthy growth was retail and other commercial facilities, an odd result given the numerous reports of failing shopping centers due to strong growth in e-commerce sales. However, much of the spending reported in the retail and other commercial facilities category was for distribution facilities and related logistic operations to support a more efficient e-commerce system.
Still, the slowdown in spending last year was sharper than expected. Annual 2015 increases were almost 16% across the entire nonresidential building category, with the office and lodging categories realizing strong gains, and the institutional categories posting increases of almost 8% overall.
Growth in activity eased in 2016, with overall spending on nonresidential buildings increasing by only 6% even though the office and lodging categories posted gains of nearly 25%. Spending on institutional facilities was disappointing, with increases totaling less than 2% in this category.
Related Stories
Market Data | Nov 23, 2020
Construction employment is down in three-fourths of states since February
This news comes even after 36 states added construction jobs in October.
Market Data | Nov 18, 2020
Architecture billings remained stalled in October
The pace of decline during October remained at about the same level as in September.
Market Data | Nov 17, 2020
Architects face data, culture gaps in fighting climate change
New study outlines how building product manufacturers can best support architects in climate action.
Market Data | Nov 10, 2020
Construction association ready to work with president-elect Biden to prepare significant new infrastructure and recovery measures
Incoming president and congress should focus on enacting measures to rebuild infrastructure and revive the economy.
Market Data | Nov 9, 2020
Construction sector adds 84,000 workers in October
A growing number of project cancellations risks undermining future industry job gains.
Market Data | Nov 4, 2020
Drop in nonresidential construction offsets most residential spending gains as growing number of contractors report cancelled projects
Association officials warn that demand for nonresidential construction will slide further without new federal relief measures.
Market Data | Nov 2, 2020
Nonresidential construction spending declines further in September
Among the sixteen nonresidential subcategories, thirteen were down on a monthly basis.
Market Data | Nov 2, 2020
A white paper assesses seniors’ access to livable communities
The Joint Center for Housing Studies and AARP’s Public Policy Institute connect livability with income, race, and housing costs.
Market Data | Nov 2, 2020
More contractors report canceled projects than starts, survey finds
Construction employment declined in most metros in latest 12 months.
Multifamily Housing | Oct 30, 2020
The Weekly show: Multifamily security tips, the state of construction industry research, and AGC's market update
BD+C editors speak with experts from AGC, Charles Pankow Foundation, and Silva Consultants on the October 29 episode of "The Weekly." The episode is available for viewing on demand.