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
Building Materials | Oct 2, 2023
Purdue engineers develop intelligent architected materials
Purdue University civil engineers have developed innovative materials that can dissipate energy caused by various physical stresses without sustaining permanent damage.
Giants 400 | Sep 28, 2023
Top 100 University Building Construction Firms for 2023
Turner Construction, Whiting-Turner Contracting Co., STO Building Group, Suffolk Construction, and Skanska USA top BD+C's ranking of the nation's largest university sector contractors and construction management firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking includes revenue for all university/college-related buildings except student residence halls, sports/recreation facilities, laboratories, S+T-related buildings, parking facilities, and performing arts centers (revenue for those buildings are reported in their respective Giants 400 ranking).
Construction Costs | Sep 28, 2023
U.S. construction market moves toward building material price stabilization
The newly released Quarterly Construction Cost Insights Report for Q3 2023 from Gordian reveals material costs remain high compared to prior years, but there is a move towards price stabilization for building and construction materials after years of significant fluctuations. In this report, top industry experts from Gordian, as well as from Gilbane, McCarthy Building Companies, and DPR Construction weigh in on the overall trends seen for construction material costs, and offer innovative solutions to navigate this terrain.
Multifamily Housing | Sep 26, 2023
Midwest metros see greatest rent increase in September 2023
While the median monthly price of rent has increased by 0.71% in August, the year-over-year estimates show a national change of -0.06 percent.
Data Centers | Sep 21, 2023
North American data center construction rises 25% to record high in first half of 2023, driven by growth of artificial intelligence
CBRE’s latest North American Data Center Trends Report found there is 2,287.6 megawatts (MW) of data center supply currently under construction in primary markets, reaching a new all-time high with more than 70% already preleased.
Data Centers | Sep 15, 2023
Power constraints are restricting data center market growth
There is record global demand for new data centers, but availability of power is hampering market growth. That’s one of the key findings from a new CBRE report: Global Data Center Trends 2023.
Contractors | Sep 12, 2023
The average U.S. contractor has 9.2 months worth of construction work in the pipeline, as of August 2023
Associated Builders and Contractors' Construction Backlog Indicator declined to 9.2 months in August, down 0.1 month, according to an ABC member survey conducted from Aug. 21 to Sept. 6. The reading is 0.5 months above the August 2022 level.
Contractors | Sep 11, 2023
Construction industry skills shortage is contributing to project delays
Relatively few candidates looking for work in the construction industry have the necessary skills to do the job well, according to a survey of construction industry managers by the Associated General Contractors of America (AGC) and Autodesk.
Giants 400 | Sep 5, 2023
Top 80 Construction Management Firms for 2023
Alfa Tech, CBRE Group, Skyline Construction, Hill International, and JLL top the rankings of the nation's largest construction management (as agent) and program/project management firms for nonresidential buildings and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Sep 5, 2023
Top 150 Contractors for 2023
Turner Construction, STO Building Group, DPR Construction, Whiting-Turner Contracting Co., and Clark Group head the ranking of the nation's largest general contractors, CM at risk firms, and design-builders for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2023 Giants 400 Report.