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
Big Data | May 5, 2016
The Center for Neighborhood Technology has launched the largest source of transit data in the country
AllTransit analyzes the social benefits of good transit service by analyzing data related to health, equity, and economic development.
Industry Research | May 5, 2016
National survey reveals offices aren’t built to benefit employees
A Saint-Gobain and SageGlass Work Environment Survey found insufficient access to daylight, poor air quality, and distracting noise at workplaces as the major issues experienced by employees
Industry Research | Apr 15, 2016
Commercial construction starts jumped 18% in March
Nonresidential construction has gotten off to a hot start this year and looks to gain even more momentum throughout the spring.
Industry Research | Apr 14, 2016
Contractor confidence down, but not out
Despite a slight regression, nonresidential construction confidence is still in positive territory
Industry Research | Apr 7, 2016
CBRE provides latest insight into healthcare real estate investors’ strategies
Survey respondents are targeting smaller acquisitions, at a time when market cap rates are narrowing for different product types.
Industry Research | Apr 4, 2016
AIA: Public-private partnerships could solve nation’s public infrastructure crisis
A new white paper addresses the nation’s $3 trillion public infrastructure crisis and how public private partnerships offer a possible solution.
Retail Centers | Mar 16, 2016
Food and technology will help tomorrow’s malls survive, says CallisonRTKL
CallisonRTKL foresees future retail centers as hubs with live/work/play components.
Architects | Mar 11, 2016
AIA survey finds many women and minority architects still feeling underrepresented and unfulfilled
Dissatisfaction with “work-life balance” and compensation are cited as reasons why companies’ diversity strategies may be faltering.
Office Buildings | Feb 26, 2016
Benching, desking, and (mostly) paper-free: Report identifies top trends in workplace design for 2016
The report, from Ted Moudis Associates, encompasses over 2.5 million sf of workspace built over the past two years.
Multifamily Housing | Feb 24, 2016
Senior housing sector experiences record-setting year, says CBRE
Senior housing occupancy is at its highest level since 2007, and 2015 was a record year for sales and institutional transactions, according to CBRE.