Design-build delivered projects will account for nearly half of all construction spending by 2025, according to the consulting and investment firm FMI’s latest market research on design-built utilization.
FMI’s research for its 50-page report is based on a survey of 279 industry stakeholders and 46 interviews. FMI conducted the study in partnership with the Design-Build Institute of America (DBIA), and piggybacks on research in 2018 that confirmed design-build was no longer just an alternative delivery method, but one that had been embraced by a growing number of owner-developers and their AEC partners.
FMI’s latest report, which it releases today, forecasts that spending for design-build construction put in place will grow at a compound annual rate of 7.6% over the years 2021 through 2025, and hit $405.7 billion in 2025, or 47% of total construction spending that year, vs 42% of the total in 2021.
FMI expects the five-year rate of growth to be higher than the national average in the West South Central, South Atlantic, Middle Atlantic, and New England regions.
![Design-Build delivery is popular in the South and New England.](/sites/default/files/inline-images/D-B%20geography.png)
CERTAIN SECTORS MORE DISPOSED TOWARD DESIGN-BUILD
Over the forecast years, FMI estimates that the aggregate spending on projects delivered via design-build will be $1.732 trillion, or 46.2% of the $3.742 trillion spent on all construction projects. Highway and street projects will account for 16% of the design-build spending, followed by Education (15%), Manufacturing (13%) and Commercial and Office (12% each). Spending on design-build water/wastewater projects is expected to show the highest annual growth rate—11.1%—although that sector will represent only 5% of total design-build project spending over the forecast years.
![Education and Manufacturing are sectors that lend themselves to Design-Build project delivery.](/sites/default/files/inline-images/D-B%20by%20bldg%20type.png)
Design-build rated highest across all project delivery methods, with 77% of the report’s respondents having “very good” or “excellent” experiences with the method. The 2021 study found that 60% of respondents identified “owner goals and objectives” as an influence on their choice of delivery methods, following by 50% who identified a project’s complexity and innovation, and 46% who cited “delivery schedule” or “contractor experience.”
HIGH FAVORABILITY QUOTIENT
![Over past five years, Design-Build has increased market share.](/sites/default/files/inline-images/D-B%20by%20total.png)
Seventy-seven percent of the study’s respondents thought that the design-build delivery method would increase over the next five years. “We have seen significantly more design-build work,” stated one respondent quoted in the report. “Virtually everything in our geography is going design-build,” said another.
Conversely, respondents with less favorable experiences with design-build delivery noted that some owners still see this method as a way of transferring risk to the building team, and underestimate the commitment needed to make this delivery method work.
Most respondents, however, saw myriad benefits in design-build. For example, 76% of architects, designers, and engineers, and 89% of GCs and CMs, cited increased collaboration and creativity. Greater project and design control was cited by 88% of GCs/CMs and 84% of specialty trade contractors. GCs/CMs (who represented 31% of the study’s respondents) like the opportunities to innovate that design-build methods afford them, as do 90% of owner’s reps.
Nearly half—47%—of organizations that responded to FMI’s survey use fixed price/lump sum contracts for their design-build projects, compared to 39% that use guaranteed max price contracts.
Related Stories
Contractors | Jun 12, 2024
The average U.S. contractor has 8.3 months worth of construction work in the pipeline, as of May 2024
Associated Builders and Contractors reported that its Construction Backlog Indicator fell to 8.3 months in May, according to an ABC member survey conducted May 20 to June 4. The reading is down 0.6 months from May 2023.
MFPRO+ News | Jun 11, 2024
Rents rise in multifamily housing for May 2024
Multifamily rents rose for the fourth month in a row, according to the May 2024 National Multifamily Report. Up 0.6% year-over-year, the average U.S. asking rent increased by $6 in May, up to $1,733.
Construction Costs | May 16, 2024
New download: BD+C's May 2024 Market Intelligence Report
Building Design+Construction's monthly Market Intelligence Report offers a snapshot of the health of the U.S. building construction industry, including the commercial, multifamily, institutional, and industrial building sectors. This report tracks the latest metrics related to construction spending, demand for design services, contractor backlogs, and material price trends.
Contractors | May 15, 2024
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of April 2024
Associated Builders and Contractors reported that its Construction Backlog Indicator increased to 8.4 months in April, according to an ABC member survey conducted April 22 to May 6. The reading is down 0.5 months from April 2023, but expanded 0.2 months from the prior month.
Healthcare Facilities | May 6, 2024
Hospital construction costs for 2024
Data from Gordian breaks down the average cost per square foot for a three-story hospital across 10 U.S. cities.
Contractors | May 1, 2024
Nonresidential construction spending rises 0.2% in March 2024 to $1.19 trillion
National nonresidential construction spending increased 0.2% in March, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.19 trillion.
AEC Tech | Apr 30, 2024
Lack of organizational readiness is biggest hurdle to artificial intelligence adoption
Managers of companies in the industrial sector, including construction, have bought the hype of artificial intelligence (AI) as a transformative technology, but their organizations are not ready to realize its promise, according to research from IFS, a global cloud enterprise software company. An IFS survey of 1,700 senior decision-makers found that 84% of executives anticipate massive organizational benefits from AI.
Hotel Facilities | Apr 24, 2024
The U.S. hotel construction market sees record highs in the first quarter of 2024
As seen in the Q1 2024 U.S. Hotel Construction Pipeline Trend Report from Lodging Econometrics (LE), at the end of the first quarter, there are 6,065 projects with 702,990 rooms in the pipeline. This new all-time high represents a 9% year-over-year (YOY) increase in projects and a 7% YOY increase in rooms compared to last year.
Construction Costs | Apr 18, 2024
New download: BD+C's April 2024 Market Intelligence Report
Building Design+Construction's monthly Market Intelligence Report offers a snapshot of the health of the U.S. building construction industry, including the commercial, multifamily, institutional, and industrial building sectors. This report tracks the latest metrics related to construction spending, demand for design services, contractor backlogs, and material price trends.
Market Data | Apr 16, 2024
The average U.S. contractor has 8.2 months worth of construction work in the pipeline, as of March 2024
Associated Builders and Contractors reported today that its Construction Backlog Indicator increased to 8.2 months in March from 8.1 months in February, according to an ABC member survey conducted March 20 to April 3. The reading is down 0.5 months from March 2023.