Despite what it describes as a “chaotic” year saddled with labor shortages and interest-rate creep, the American Institute of Architects (AIA) estimates that spending for nonresidential construction increased by nearly 8% in 2016. That growth is expected to continue for “another couple of years,” albeit somewhat more modestly.
The AIA Consensus Forecast projects a 5.6% increase in nonres construction spending this year, and 4.8% in 2018, with commercial and industrial sectors growing at slower rates. (AIA did not include dollar amounts with its forecast.) And certain sectors, such as offices and hotels, are expected to cool considerably.
Offices, which increased by more than 20% in 2016, will grow 10.6% this year and by 4.6% in 2018, by AIA’s reckoning. Hotel spending, up 25% last year, should rise by 7.2% in 2017, but only by 1.8% the following year, according to AIA projections. Spending on healthcare building is expected to stay at nearly 5% growth this year and next.
Office construction spending is expected to stay relatively strong this year, with some fading in 2018. But hotel construction is expected to experience a significant decline. Image: AIA Consensus Construction Forecast.
AIA’s forecast is in line with other industry watchers, with the notable exception of a rosier portrait painted by Dodge Data and Analytics, which estimates that nonres spending, at $406.9 billion last year, will increase by 8.2% this year and by 7.3% in 2018. Dodge is far more bullish than AIA on office construction. But it also sees negative growth in the hotel sector in 2018.
On the flip side, FMI expects growth this year to be only 4.4%, and 4.1% in 2018, and foresees a weaker industrial sector than some of the other prognosticators.
Kermit Baker, Hon. AIA, AIA’s chief economist, addressed several issues affecting construction spending that could be impacted by the new Trump administration. For example, infrastructure spending, which is currently at about $1.2 trillion a year, could get a big boost if proposals to spend another $1 trillion over the next decade are realized.
The proposed repeal of the Affordable Care Act, and what would replace it are serious concerns for a construction industry where healthcare accounts for about 10% of total spending.
Trump has also promised “massive” regulatory rollbacks, especially on the environment front. Baker cites an NAHB study posted last May that attributes 24.3% of the price of a single-family home to government regulations. (Three-fifths of this is due to higher finished lot costs resulting from regulations.)
Baker also touches immigration restrictions that could “exacerbate an already serious labor problem” in a construction industry that is “most reliant on immigration for its workforce.”
On the whole, though, AIA is “quite positive” about the prospects for the construction sector, which it expects to outperform the broader economy over the next two years. However, AIA also see an industry “on the down side of this construction cycle.” The commercial sector is expected to show signs of slowing first, and AIA foresees its growth rate dropping from 17% in 2017, to 8% this year and just over 4% in 2018.
“Being this late in the cycle, the industry is more vulnerable to external disruptions, and the list of possibilities in this category is very long at present,” Baker writes.
Related Stories
| Jul 9, 2014
Dragon-inspired hotel conveys Vietnamese hospitality [2014 Building Team Awards]
An international Building Team unites to create Vietnam’s first JW Marriott luxury property.
| Jul 7, 2014
7 emerging design trends in brick buildings
From wild architectural shapes to unique color blends and pattern arrangements, these projects demonstrate the design possibilities of brick.
| Jul 7, 2014
A climate-controlled city is Dubai's newest colossal project
To add to Dubai's already impressive portfolio of world's tallest tower and world's largest natural flower garden, Dubai Holding has plans to build the world's largest climate-controlled city.
| Jun 30, 2014
Research finds continued growth of design-build throughout United States
New research findings indicate that for the first time more than half of projects above $10 million are being completed through design-build project delivery.
| Jun 18, 2014
Arup uses 3D printing to fabricate one-of-a-kind structural steel components
The firm's research shows that 3D printing has the potential to reduce costs, cut waste, and slash the carbon footprint of the construction sector.
| Jun 17, 2014
World's tallest pair of towers to serve as 'environmental catalyst' for China
The Phoenix Towers are expected to reach 1 km, the same height as Adrian Smith and Gordon Gill's Kingdom Tower, but would set a record for multiple towers in one development.
| Jun 12, 2014
Austrian university develops 'inflatable' concrete dome method
Constructing a concrete dome is a costly process, but this may change soon. A team from the Vienna University of Technology has developed a method that allows concrete domes to form with the use of air and steel cables instead of expensive, timber supporting structures.
| Jun 9, 2014
Green Building Initiative launches Green Globes for Sustainable Interiors program
The new program focuses exclusively on the sustainable design and construction of interior spaces in nonresidential buildings and can be pursued by both building owners and individual lessees of commercial spaces.
| Jun 2, 2014
Parking structures group launches LEED-type program for parking garages
The Green Parking Council, an affiliate of the International Parking Institute, has launched the Green Garage Certification program, the parking industry equivalent of LEED certification.
| May 30, 2014
Developer will convert Dallas' storied LTV Building into mixed-use residential tower
New Orleans-based HRI Properties recently completed the purchase of one of the most storied buildings in downtown Dallas. The developer will convert the LTV Building into a mixed-use complex, with 171 hotel rooms and 186 luxury apartments.
