flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

Construction spending to grow modestly in 2020, predicts JLL’s annual outlook

Market Data

Construction spending to grow modestly in 2020, predicts JLL’s annual outlook

But the coronavirus has made economic forecasting perilous.


By John Caulfield, Senior Editor | March 17, 2020

Construction projects financed by public dollars are expected to show the strongest growth in 2020. Charts: JLL Construction Outlook

Nonresidential construction spending, which rose by 3.5% in the second half of 2019, is expected to increase in 2020, albeit at a modest 2% clip, with demand projected to weaken as the year goes on.

In its Construction Outlook for the U.S. 2020, JLL attributed last year’s performance mostly to the 10.1% rise in public spending. Construction employment was up 2.1% to 6.44 million, and construction unemployment dipped to 4.5%. Indexed building costs increased 1.5% year-over-year.

In 2020, the dollar value of construction starts (according to Dodge Data & Analytics) is expected to decline by nearly 5%.  And JLL expects the disparity between public and private nonres construction spending to continue.

With nearly all growth in construction spending coming from public dollars, the sectors expected to do well this year will be those with the most public investment, such as transportation, education, healthcare and public safety. The reverse will be true about multifamily residential, commercial office, hotels, and retail.

JLL forecasts construction inflation to fall somewhere between 1% and 3%, and by a bit higher percentages on the labor side.

Inflation in the cost of construction materials has been held in check.

 

JLL was reluctant to speculate on the impact of the coronavirus on construction. But it did note that roughly between one-quarter and one-third of all construction products in the U.S. are sourced from China, so any sustained slowdown in Chinese production due to the spread of COVID 19 may cause material shortages in the U.S.

The Outlook’s projections about the U.S. economy—that it would remain strong enough in 2020 to keep the construction industry on track overall, but would not provide the private investment fuel that would be necessary for robust growth—were made before the economy appeared to be sinking into recession in mid March.

On the plus side, the Outlook points out that the ratified U.S.-Mexico-Canada Agreement is on track to be fully implemented in 2020. “The agreement brings stability to critical material markets for the construction industry, particularly for lumber, steel and aluminum,” JLL posited. Across the Pacific, the U.S. and China signed a Phase One agreement to roll back a very small portion of the tariffs that were imposed between the two countries over the past few years. Phase One represents the first time under the Trump administration that average tariff rates on Chinese imports have declined.

Construction confidence was flat to down in 2019, according to several measurements.

 

Much of the Outlook was actually devoted to recounting key metrics from last year. It points out, for example, that construction confidence was flat in 2019, while the Commercial Construction Index, as aggregated by the U.S. Chamber of Commerce and USG, dropped in the fourth quarter to its lower level in three years.

Last year, the rate of increase for construction materials eased a bit, to 3%, with most of that increase occurring in the first half of the year. Steel-mill products, in fact, experienced a 14.2% decrease over the 12-month period.

The most expensive cities with more than 150,000 people to build in last year were the usual suspects: New York, San Francisco, Chicago, Honolulu, and Fairbanks, Alaska. The least expensive were Knoxville, Tenn., Austin, Amarillo, Texas, Little Rock, Ark., and El Paso, Texas.

JLL’s Outlook also provides regional comparisons for the years 2008 through 2019. In that context, for example, warehouses were the strongest construction sector in the Midwest and Northeast, Amusement & Recreation in the West, and Auto Service/Parts in the South. The sectors with the greatest decline over that decade were bank and financial offices (Northeast and South), Multiretail (West), and houses of worship (Midwest).

As for overall growth during this 10-year period. the Northeast, West, and Midwest fell short of the national average in terms of construction backlog, while the South outperformed the country as a whole.

Related Stories

Market Data | Sep 23, 2020

7 must reads for the AEC industry today: September 23, 2020

The new Theodore Presidential Library and the AIA/HUD's Secretary's Awards honor affordable, accessible housing.

Market Data | Sep 22, 2020

6 must reads for the AEC industry today: September 22, 2020

Construction employment declined in 39 states and no ease of lumber prices in sight.

Market Data | Sep 21, 2020

Washington is the US state with the most value of construction projects underway, says GlobalData

Of the top 10 largest projects in the Washington state, nine were in the execution stage as of August 2020.

Market Data | Sep 21, 2020

Construction employment declined in 39 states between August 2019 and 2020

31 states and DC added jobs between July and August.

Market Data | Sep 21, 2020

6 must reads for the AEC industry today: September 21, 2020

Four projects receive 202 AIA/ALA Library Building Award and Port San Antonio's new Innovation Center.

Market Data | Sep 18, 2020

Follow up survey of U.S. code officials demonstrates importance of continued investment in virtual capabilities

Existing needs highlight why supporting building and fire prevention departments at the federal, state, and local levels is critical.  

Market Data | Sep 18, 2020

6 must reads for the AEC industry today: September 18, 2020

Sagrada Familia completion date pushed back and energy code appeals could hamper efficiency progress.

Market Data | Sep 17, 2020

6 must reads for the AEC industry today: September 17, 2020

Foster + Partners-designed hospital begins construction in Cairo and heat pumps are the future for hot water.

Market Data | Sep 16, 2020

6 must reads for the AEC industry today: September 16, 2020

REI sells unused HQ building and Adjaye Associates will design The Africa Institute.

Market Data | Sep 15, 2020

7 must reads for the AEC industry today: September 15, 2020

Energy efficiency considerations for operating buildings during a pandemic and is there really a glass box paradox?

boombox1
boombox2
native1

More In Category

Healthcare Facilities

Watch on-demand: Key Trends in the Healthcare Facilities Market for 2024-2025

Join the Building Design+Construction editorial team for this on-demand webinar on key trends, innovations, and opportunities in the $65 billion U.S. healthcare buildings market. A panel of healthcare design and construction experts present their latest projects, trends, innovations, opportunities, and data/research on key healthcare facilities sub-sectors. A 2024-2025 U.S. healthcare facilities market outlook is also presented.




halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021