Slower growth in the general economy, brought on by seemingly mounting national and international vulnerabilities, is putting downward pressure on the construction industry, whose sectors expanded last year by 20% or more but are moderating to single-digit growth levels.
That’s the viewpoint of the American Institute of Architects’ semiannual Consensus Construction Forecast Panel, which expects building construction spending to increase by just under 6%, its growth rate through the first half of the year, through 2017.
To view an interactive chart comparing the forecasts from the seven market watchers on the Panel, click here.
AIA puts out its Consensus to project business conditions for the coming 12 to 18 months. Kermit Baker, Hon. AIA, the Institute’s chief economist, notes that several factors—job growth, consumer confidence, low interest and inflation rates, and a trending single-family housing market—offer positive economic signs.
Good reception is also coming from AIA’s Architectural Buildings Index, a historically reliable indicator of future spending in the nonresidential sector. The latest data indicate that architectural firms are increasing their backlog of project activity.
Still, there is a growing list of issues “that threatens to unhinge this economic expansion, both national and international,” Baker writes.
These include:
•A weak manufacturing sector, which has declined 13 of the past 17 months dating back to the beginning of 2015.
•Sagging international economies that could diminish U.S. exports. China, Brazil, and Russia “continue to face difficulties,” observes Baker. And the U.K.’s recent split from the European Union could instigate more restrictive trade policies. On the other hand, a stronger U.S. dollar provides incentives for increasing imports.
•The upcoming presidential election, and the “unusually high” level of uncertainty regarding post-election policies.
Baker cites a recent Urban Land-generated consensus forecast of real estate trends that suggests “we are in the latter stages of this current real estate cycle,” where vacancy rates are expected to increase, and rent increases to slow, for multifamily housing and hotel rooms through 2017 and 2018.
Spending on hotel construction is on pace to increase by a still-healthy 7.6% in 2017, but down from 17.9% in 2016, according to AIA’s consensus forecast. Office space spending will grow by 14.7% this year, but only by 7.5% next.
The institutional side is expected rise by 6.7% this year and next. Healthcare facilities spending should increase to 5% next year, from 2.3% in 2016. Public Safety is expected to recover from a 3.7% decline to a 3.3% gain next year. Spending on Education construction, one of the industry’s big tickets, should see a slight downtick in growth, to 6.3% in 2017 from 6.5% this year.
Related Stories
Industry Research | May 20, 2021
Latest ULI report forecasts robust real estate rebound
It’s going to take some time, though, for the office sector to recover
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 | Feb 24, 2021
2021 won’t be a growth year for construction spending, says latest JLL forecast
Predicts second-half improvement toward normalization next year.
Healthcare Facilities | Feb 18, 2021
The Weekly show, Feb 18, 2021: What patients want from healthcare facilities, and Post-COVID retail trends
This week on The Weekly show, BD+C editors speak with AEC industry leaders from JLL and Landini Associates about what patients want from healthcare facilities, based on JLL's recent survey of 4,015 patients, and making online sales work for a retail sector recovery.
Market Data | Jan 19, 2021
2021 construction forecast: Nonresidential building spending will drop 5.7%, bounce back in 2022
Healthcare and public safety are the only nonresidential construction sectors that will see growth in spending in 2021, according to AIA's 2021 Consensus Construction Forecast.
AEC Tech | Feb 13, 2020
Exclusive research: Download the final report for BD+C's Giants 300 Technology and Innovation Study
This survey of 130 of the nation's largest architecture, engineering, and construction firms tracks the state of AEC technology adoption and innovation initiatives at the AEC Giants.
Office Buildings | Feb 11, 2020
Forget Class A: The opportunity is with Class B and C office properties
There’s money to be made in rehabbing Class B and Class C office buildings, according to a new ULI report.
Industry Research | Dec 13, 2019
Attention building design experts: BD+C editors need your input for our 2020 Color Trends Survey
The 2020 Color Trends research project will assess leading and emerging trends and drivers related to the use of color on commercial, institutional, and multifamily building projects.
Architects | Sep 11, 2019
Buoyed by construction activity, architect compensation continues to see healthy gains
The latest AIA report breaks down its survey data by 44 positions and 28 metros.