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 | Jun 8, 2018
Dodge Momentum Index inches up in May
May’s gain was the result of a 4.7% increase by the commercial component of the Momentum Index.
Market Data | Jun 4, 2018
Nonresidential construction remains unchanged in April
Private sector spending increased 0.8% on a monthly basis and is up 5.3% from a year ago.
Market Data | May 30, 2018
Construction employment increases in 256 metro areas between April 2017 & 2018
Dallas-Plano-Irving and Midland, Texas experience largest year-over-year gains; St. Louis, Mo.-Ill. and Bloomington, Ill. have biggest annual declines in construction employment amid continuing demand.
Market Data | May 29, 2018
America’s fastest-growing cities: San Antonio, Phoenix lead population growth
San Antonio added 24,208 people between July 2016 and July 2017, according to U.S. Census Bureau data.
Market Data | May 25, 2018
Construction group uses mobile technology to make highway work zones safer
Mobile advertising campaign urges drivers who routinely pass through certain work zones to slow down and be alert as new data shows motorists are more likely to be injured than construction workers.
Market Data | May 23, 2018
Architecture firm billings strengthen in April
Firms report solid growth for seven straight months.
Market Data | May 22, 2018
Vacancies stable, rents rising, and pipeline receding, according to Transwestern’s 1Q US Office Market report
The Big Apple still leads the new construction charge.
Market Data | May 18, 2018
Construction employment rises in 38 states and D.C. from April 2017 to April 2018
California & West Virginia have biggest annual job gains, North Dakota has largest decline; California & Louisiana have largest monthly pickup, Indiana & North Dakota lead monthly drops.
High-rise Construction | May 18, 2018
The 100 tallest buildings ever conventionally demolished
The list comes from a recent CTBUH study.
Resiliency | May 17, 2018
Architects brief lawmakers and policy-makers on disaster recovery as hurricane season approaches
Urge senate passage of disaster recovery reform act; Relationship-building with local communities.