Manufacturing and lodging continue to lead the charge in the construction sector, which is expected to grow by 6% in 2015, according to the latest forecasts by FMI, the investment consulting and banking firm. That’s a percentage point higher than the growth FMI projected three months ago.
FMI also expects construction activity to increase by 7% in 2016, and reach $1.09 trillion, the highest level since 2008. Nonresidential construction in place should hit $423.96 billion this year, representing a 9% gain, and keep growing by 7% to $452.25 billion in 2016. For the most part, the biggest sectors of nonresidential construction are expected to thrive through next year.
Here are some of the report’s highlights:
• Manufacturing has been the “rock star” of nonresidential building, says FMI. Construction activity in this sector should be up 18% to $68.2 billion this year. “Manufacturing capacity utilization rates [were] at 77.7% of capacity in July 2015, which is near the historical average.” However, FMI expects this sector to slow next year, when construction growth is projected to increase by just 5% to $71.9 billion. “One concern, like much of the construction industry, is the lack of trained personnel needed to keep up with growing backlogs.”
• Lodging construction continues to be strong. FMI forecasts 15% growth this year to $18.5 billion, and 12% in 2016 to $20.8 billion. To bolster its predictions, FMI quotes a May 2015 report from Lodging Econometrics that estimates 3,885 projects and 488,230 rooms currently under construction. “The greatest amount of growth will continue to be upscale properties and event locations,” FMI states;
• Office construction has slowed a bit from its gains in 2014. But FMI still expects office construction to be up by 14% to $52.6 billion this year, and by 7% to $56.3 billion in 2016. The National Association of Realtors predicts that office vacancies would drop below 15% by year’s end. And JLI noted recently that more than 40% of all office leases 20,000 sf or larger are exhibiting growth;
• Healthcare construction is on a path to return to “historical growth rates” over the next four years. That would mean a 5% increase to $40.4 billion this year, and a 10% gain to $41.9 billion next year. FMI points out, though, that “the changing nature of health care and insurance” continues to make investors nervous. Renovation and expansion will account for the lion’s share of construction projects going forward;
• The Educational sector “is growing again,” albeit modestly, says FMI. Construction in place should increase by 3% to $82.3 billion this year, and then bump up by 10% to $85.8 billion in 2016. FMI notes that K-12 construction is getting less funding from states, even as enrollment is expected to expand by 2.5 million over the next four years.
• Commercial construction—which is essentially the retail and food segments—should be up 8% to $67.7 billion in 2015, and grow by another 10% to $74.4 billion, next year. FMI quotes Commerce Department estimates that food services and drinking places were up in July by 9% over the same month in 2014, and non-store retail rose by 5.2%.
• Amusements and recreation-related construction was up 9% last year, and is expected to increase to 11% to $18.5 billion in 2015, and by 8% next year, when it should hit nearly $20 billion. FMI anticipates ongoing municipal demand for sports venues, which are seen as “job creators.”
• The slowdown of multifamily construction may have to wait another year. FMI expects construction of buildings with five or more residential units to increase by 11% in 2015, and by 12% next year to $63.1 billion.
Related Stories
| Sep 8, 2014
First Look: Foster + Partners, Fernando Romero win competition for Mexico City's newest international airport
Designed to be the world’s most sustainable airport, the plan uses a single, compact terminal scheme in lieu of a cluster of buildings, offering shorter walking distances and fewer level changes, and eliminating the need for trains and tunnels.
| Sep 7, 2014
Ranked: Top state government sector AEC firms [2014 Giants 300 Report]
PCL Construction, Stantec, and AECOM head BD+C's rankings of the nation's largest state government design and construction firms, as reported in the 2014 Giants 300 Report.
| Sep 7, 2014
Ranked: Top military sector AEC firms [2014 Giants 300 Report]
Balfour Beatty, Fluor, and HDR top BD+C's rankings of the nation's largest military sector design and construction firms, as reported in the 2014 Giants 300 Report.
| Sep 5, 2014
First Look: Zaha Hadid's Grace on Coronation towers in Australia
Zaha Hadid's latest project in Australia is a complex of three, tapered residential high-rises that have expansive grounds to provide the surrounding community unobstructed views and access to the town's waterfront.
| Sep 4, 2014
Ranked: Top courthouse sector AEC firms [2014 Giants 300 Report]
Fentress Architects, Tutor Perini, and AECOM top BD+C's rankings of design and construction firms with the most revenue from courthouse facilities, as reported in the 2014 Giants 300 Report.
| Sep 4, 2014
Strong industry growth could be slowed by skilled labor shortage, says Gilbane report
While construction spending for 2014 will finish the year 5.5% higher than 2013 and the unemployment rate in construction is down to 7.5%, the industry has been losing workers for more than five years, according to a new Gilbane report.
| Sep 3, 2014
Ranked: Top local government sector AEC firms [2014 Giants 300 Report]
STV, HOK, and Turner top BD+C's rankings of the nation's largest local government design and construction firms, as reported in the 2014 Giants 300 Report.
| Sep 3, 2014
WSP to acquire Parsons Brinckerhoff in $1.35 billion deal
The deal, which has been approved by the boards of WSP and Balfour Beatty, has an enterprise value of $1.243 billion, plus another $110 million in cash retained by PB.
| Sep 3, 2014
New designation launched to streamline LEED review process
The LEED Proven Provider designation is designed to minimize the need for additional work during the project review process.
| Sep 2, 2014
Melbourne's tallest residential tower will have 'optically transformative façade'
Plans for Melbourne's tallest residential tower have been released by Elenberg Fraser Architects. Using an optically transformative façade and botanical aesthetic, the project seeks to change the landscape of Australia's Victoria state.