The United States is on track to end this year with its highest level of construction put in place since 2008, a total that, if achieved, would represent nearly 7% of the country’s GDP.
However, construction has slowed of late, according to FMI Corporation, the management and investment consultant. In its Q2 Construction Outlook, FMI estimates construction in place this year would rise 5% to $1.012 trillion. In the first quarter, FMI had projected an 8% annualized gain.
FMI estimates the nonresidential building portion of total construction to expand by 7.6% to $407.2 billion in 2015, and to keep growing through 2019, when it should reach $510.2 billion. However, with housing also expected to recover strongly during this period, nonresidential building’s share of total construction put in place would fall in 2019 to 39.1%, from 40.2% in 2015.
Construction spending in general “continues to build on the rapid growth experienced in the industry last year,” observes Chris Daum, FMI’s senior managing director and president of Investment Banking. FMI’s latest report looks at 17 sectors. Here are some highlights:
• Don’t anticipate much from the two big-ticket sectors, Healthcare and Education, says FMI.
Even with 2.5 million students expected to enroll over the next four year, FMI doesn’t see Education growing in 2015. “One of the biggest hurdles to new construction continues to be state and local budgets,” it writes, adding that there is likely to be “significantly less” state funding for K-12 schools.”
Healthcare should fare a little better, growing by 2% in 2015, and 4% in 2016 to $41 billion. But a “difficult funding environment,” along with changes to construction delivery methods, poses challenges. One trend FMI identifies is toward rebuilding existing facilities using modern hospital design and allow for greater use of technology.
• Manufacturing: After a double-digit gain in 2014, FMI expects manufacturing construction to increase by 17% this year, and then slow to an 8% increase in 2016. It cautions that manufacturing capital construction is highly cyclical when markets reach a state of overcapacity, as some petrochemical products are expected to do in the next few years after a spate of building.
• Amusement/recreation: This section grew by 7% in 2014, and should top that at 9% in 2015. Several major sports stadiums are under construction, and a number of smaller towns and colleges are improving their sports facilities. States also continue to welcome gaming in hopes of increasing their tax bases. A new mixed-use development model combines multiple entertainment venues and shopping into an overall plan.
• Lodging: This sector will be a bright spot, growing by 19% in 2015, and by 12% in 2016, before slowing to 7% in 2019. To buttress its projections, FMI quotes from Lodging Econometrics’ May 2015 reports, which notes that there are 3,885 projects with 488,230 rooms in the construction pipeline, “with the last three quarters posting Year-Over-Year gains of 20% or greater.”
• Office: This sector is benefiting from improving employment levels, and should see 11% growth in 2015, albeit a bit slower than the 19% it hit in 2014.
• Commercial: Capturing what’s going on in retail construction, this sector is expected to grow by 13% to $69 billion this year, but be flat in 2016. “Consumers remain relatively confident about the economy, but they are also remaining conservative in their discretionary spending, at least until wage recovery improves,” FMI writes.
• Religious: What growth there is will likely be in renovation, as new congregations move into vacated retail space or reoccupy church buildings abandoned by other faiths. FMI thinks this sector could be flatlining, and quotes statistics from Pew Research Center that show the percentage of adults (ages 18 and older) who describe themselves as Christians dropping by nearly eight percentage points in just seven years through 2014. Over that same period, the percentage of Americans who are religiously unaffiliated jumped by more than six points, to 22.8%
• Transportation: After registering 5% growth in 2014, transportation is expected to add 7% for 2015 to $44.7 billion. But this sector remains heavily dependent on government support that is never a certainty.
Related Stories
| Jun 4, 2013
Notification reinvented: SimplexGrinnell introduces revolutionary family of intelligent notification appliances
Simplex TrueAlert ES uses addressable technology to improve protection, simplify installation and reduce operating costs.
| Jun 3, 2013
6 residential projects named 'best in housing design' by AIA
The Via Verde mixed-use development in Bronx, N.Y., and a student housing complex in Seattle are among the winners of AIA's 2013 Housing Awards.
| Jun 3, 2013
Trifecta of awards recognize Vision/Rubenstein campus, Bayer Healthcare HQ
When Vision Equities, LLC and Rubenstein Partners purchased the 200-acre former Alcatel-Lucent campus in Whippany a little more than two years ago, the partnership recognized the property’s potential to serve as a benchmark infill revitalization for the State of New Jersey.
| May 31, 2013
Nation's first retrofitted zero-energy building opens in California
The new training facility for IBEW/NECA is the first commercial building retrofit designed to meet the U.S. Department of Energy’s requirements for a net-zero energy building.
| May 30, 2013
The Make It Right squabble: ‘How many trees did you plant today?’
A debate has been raging in the blogosphere over the last few months about an article in The New Republic, “If You Build It, They Might Not Come,” in which staff writer Lydia DePillis took Brad Pitt’s Make It Right Foundation to task for botching its effort to revitalize the Lower Ninth Ward of New Orleans.
| May 29, 2013
Realtors report positive trends in commercial real estate market
Realtors who practice commercial real estate have reported an increase in annual gross income for the third year in a row, signaling the market is on the road to recovery.
| May 28, 2013
LED lighting's risks and rewards
LED lighting technology provides unique advantages, but it’s also important to understand its limitations for optimized application.
| May 28, 2013
Minneapolis transit hub will double as cultural center [slideshow]
The Building Team for the Interchange project in downtown Minneapolis is employing the principles of "open transit" design to create a station that is one part transit, one part cultural icon.
| May 24, 2013
First look: Revised plan for Amazon's Seattle HQ and 'biodome'
NBBJ has released renderings of a revised plan for Amazon's new three-block headquarters in Seattle. The proposal would replace a previously approved six-story office building with a three-unit "biodome."