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
| May 8, 2012
WDMA and AAMA release window, door & skylight market studies
Historic data for 2006 through 2011 and forecast data for 2012 through 2015 are included in the report.
| May 8, 2012
Study presents snapshot of domestic violence shelter services
Unique partnership of architects and domestic violence advocates brings new strategies for emergency housing.
| May 8, 2012
Gensler & J.C. Anderson team for pro bono high school project in Chicago
City Year representatives came to Gensler for their assistance in the transformation of the organization’s offices within Orr Academy High School, which also serve as an academic and social gathering space for students and corps members.
| May 8, 2012
Skanska USA hires Zamrowski as senior project manager
In his new role at Skanska, Zamrowski will serve as the day-to-day on-site contact for select Pennsylvania-based projects during all phases of construction.
| May 8, 2012
Morgan/Harbour completes three projects at Columbia Centre
Projects completed on behalf of property owner, White Oak Realty Partners, LLC, Pearlmark Realty Partners, LLC and Angelo Gordon & Co.
| May 7, 2012
4 more trends in higher-education facilities
Our series on college buildings continues with a look at new classroom designs, flexible space, collaboration areas, and the evolving role of the university library.
| May 7, 2012
Best AEC Firms: MHTN Architects nine decades of dedication to Utah
This 65-person design firm has served Salt Lake City and the state of Utah for the better part of 90 years.
| May 7, 2012
2012 BUILDING TEAM AWARDS: TD Ameritrade Park
The new stadium for the College World Series in Omaha combines big-league amenities within a traditional minor league atmosphere.
| May 7, 2012
2012 BUILDING TEAM AWARDS: Fort Belvoir Community Hospital
A new military hospital invokes evidence-based design to create a LEED-certified facility for the nation’s soldiers and their families.