Nonresidential building is on track to achieve a “breakout year” in 2015, during which spending growth could exceed 20%, according to projections by construction giant Gilbane in its Summer 2015 Construction Economics Report, “Building for the Future.”
Through the first six months of the year, construction spending for residential, nonresidential building, and nonbuilding structures was increasing at the fastest pace since 2004-2005. On that basis, Gilbane expects total construction spending to expand by 10.9% to $1.067 trillion this year (the second-highest growth total ever recorded), and by more than 8% in 2016. Construction starts are expected to be up by 13.1% to 670,595 units this year.
Nonresidential building starts, which hit a 10-year low in 2012, have been increasing at an average of 17% per year. Nonresidential buildings starts since March 2014 posted the best five quarters since the third quarter of 2008. Although growth should continue, expect it to do so at a more moderate rate, says Gilbane, which predicts those starts to increase this year by only 4.5% to 228,785 units. That construction activity, however, has been driving spending, which Gilbane predicts will increase by 20.2% to $396.7 billion this year. “Escalation will climb to levels typical of rapidly growing markets,” Gilbane observes.
But nonres building’s strengths vary markedly by sector:
- Total spending for manufacturing buildings in 2015 will reach $86.4 billion, up nearly 50% from 2014. No market sector has ever before recorded a 50% year-over-year increase, and manufacturing could replace perennial leader Education as nonres building’s biggest contributing sector. Gilbane foresees spending in this sector cooling off a bit next year to a still-strong 9% increase. Gilbane points out that the manufacturing sector, through the first half of 2015, accounted for 50% of total private construction spending, which is expected to increase this year by 14.5% to $781 billion.
- Spending for educational buildings in 2015 will total $85.3 billion, a 7.1% increase from 2014, the sector’s first substantial increase since 2008. After hitting a low in the fourth quarter of 2013 not seen since 2004, educational spending has rebounded steadily. Gilbane forecasts a 6% gain in 2016.
- Total spending for healthcare construction in 2015 should be up 7% to $41.1 billion. Healthcare spending is slowly recovering after descending to an eight-year low in the fourth quarter 2014. Spending is expected to rise by 6% in 2016.
- Spending for commercial/retail buildings—which was nonres’ strongest growth market in 2012 through 2014—is projected to jump by 8.8% to $68.2 billion this year. Gilbane notes that this sector. Commercial retail is expected to realize a gain of 5.4% in 2016.
- Office building spending in 2015 is on pace to grow by 21.2% to $55.8 billion this year, on top of a 21.3% increase in 2014. Office spending will maintain upward momentum in 2016 but at a slower pace, to 8.4%.
In its report, Gilbane discusses spending for residential construction, which it expects to grow this year by 12.9% to $388 billion, and then to taper off to a 0.7% increase in 2016. “In fact, from the fourth quarter of 2013 through March 2015, new housing starts practically stalled and the rate of residential spending declined,” Gilbane states.
Gilbane is skeptical—to say the least—about other forecasts that project housing starts to reach between 1.3 million and 1.5 million units this year, which would be twice to three times historical growth rates.
The Commerce Department’s estimates for July show housing starts rose by 0.2% to a seasonally adjusted annualized rate of 1.119 million units. Multifamily starts, which over the past few years have fueled housing’s growth, were off 17% to an annualized rate of 413,000 units.
In all construction sectors, the biggest potential constraint to growth continues to be the availability of labor. Gilbane notes that the number of unfilled positions on the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey for the construction industry has been over 100,000 for 26 of the 28 months through June 2015, and has been trending up since 2012.
“As work volume begins to increase over the next few years, expect productivity to decline,” Gilbane cautions.
Related Stories
Giants 400 | Aug 30, 2021
2021 Giants 400 Report: Ranking the largest architecture, engineering, and construction firms in the U.S.
The 2021 Giants 400 Report includes more than 130 rankings across 25 building sectors and specialty categories.
Laboratories | Aug 30, 2021
Science in the sky: Designing high-rise research labs
Recognizing the inherent socioeconomic and environmental benefits of high-density design, research corporations have boldly embraced high-rise research labs.
Giants 400 | Aug 27, 2021
2021 Healthcare Sector Giants: Top architecture, engineering, and construction firms in the U.S. healthcare facilities sector
HDR, AECOM, Turner Construction, and Brasfield & Gorrie head BD+C's rankings of the nation's largest healthcare facilities sector architecture, engineering, and construction firms, as reported in the 2021 Giants 400 Report.
Giants 400 | Aug 27, 2021
2021 Office Sector Giants: Top architecture, engineering, and construction firms in the U.S. office building sector
Gensler, Jacobs, Turner Construction, and STO Building Group head BD+C's rankings of the nation's largest office building sector architecture, engineering, and construction firms, as reported in the 2021 Giants 400 Report.a
Giants 400 | Aug 26, 2021
2021 University Giants: Top architecture, engineering, and construction firms in the higher education sector
Gensler, AECOM, Turner Construction, and CannonDesign head BD+C's rankings of the nation's largest university sector architecture, engineering, and construction firms, as reported in the 2021 Giants 400 Report.
Giants 400 | Aug 26, 2021
2021 Data Center Giants: Top architecture, engineering, and construction firms in the U.S. data center facilities sector
Corgan, Holder Construction, Jacobs, and Whiting-Turner top BD+C's rankings of the nation's largest data center facilities sector architecture, engineering, and construction firms, as reported in the 2021 Giants 400 Report.
Giants 400 | Aug 26, 2021
Top 90 Construction Management + Project Management Firms for 2021
CBRE, Jacobs, Alfa Tech, and VCC head the rankings of the nation's largest construction management (as agent) and program/project management firms for nonresidential and multifamily buildings work, as reported in Building Design+Construction's 2021 Giants 400 Report.
Hotel Facilities | Aug 26, 2021
Building hotels with modules, with citizenM's Menno Hilberts
In this exclusive interview for HorizonTV, Menno Hilberts, Managing Director of Project Management with hotelier citizenM, explains how the company is employing modular construction to help double its presence in the U.S.
Giants 400 | Aug 25, 2021
Top 140 Contractors for 2021
Turner Construction, Whiting-Turner Contracting, STO Building Group, and DPR Construction top the rankings of the nation's largest general contractors, CM at risk firms, and design-builders for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2021 Giants 400 Report.
Sports and Recreational Facilities | Aug 25, 2021
The rise of entertainment districts and the inside-out stadium
Fiserv Forum, home to the 2021 NBA Champion Milwaukee Bucks, proved that the design of the space outside a stadium is just as important as inside.