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
| Feb 11, 2011
Chicago architecture firm planning one of China’s tallest towers
Chicago-based Goettsch Partners was commissioned by developer Guangzhou R&F Properties Co. Ltd. to design a new 294,570-sm mixed-use tower in Tianjin, China. The Tianjin R&F Guangdong Tower will be located within the city’s newly planned business district, and at 439 meters it will be one of China’s tallest buildings. The massive complex will feature 134,900 sm of Class A office space, a 400-key, five-star hotel, 55 condominiums, and 8,550 sm of retail space. The architects are designing the tower with multi-story atriums and a high-performance curtain wall to bring daylight deep into the building, thereby creating deeper lease spans. The project is currently finishing design.
| Feb 11, 2011
Two projects seek to reinvigorate Los Angeles County medical center
HMC Architects designed two new buildings for the Los Angeles County Martin Luther King, Jr., Medical Center as part of a $360 million plan to reinvigorate the campus. The buildings include a 120-bed hospital, which involves renovation of an existing tower and several support buildings, and the construction of a new multi-service ambulatory care center. The new facilities will have large expanses of glass at all waiting and public areas for unobstructed views of downtown Los Angeles. A curved glass entrance canopy will unite the two buildings. When both projects are completed—the hospital in 2012 and the ambulatory care center in 2013—the campus will have added more than 460,000 sf of space. The hospital will seek LEED certification, while the ambulatory care center is targeting LEED Silver.
| Feb 11, 2011
Sustainable community center to serve Angelinos in need
Harbor Interfaith Services, a nonprofit serving the homeless and working poor in the Harbor Area and South Bay communities of Los Angeles, engaged Withee Malcolm Architects to design a new 15,000-sf family resource center. The architects, who are working pro bono for the initial phase, created a family-centered design that consolidates all programs into a single building. The new three-story space will house a resource center, food pantry, nursery and pre-school, and administrative offices, plus indoor and outdoor play spaces and underground parking. The building’s scale and setbacks will help it blend with its residential neighbors, while its low-flow fixtures, low-VOC and recycled materials, and energy-efficient mechanical equipment and appliances will help it earn LEED certification.
| Feb 11, 2011
Texas megachurch inspired by yesteryear’s materials, today’s design vocabulary
The third phase of The First Baptist Church of Pasadena, Texas, involves construction of a new 115,000-sf worship center addition. Currently in design by Zeigler Cooper, the project will include a 2,500-seat worship center (with circular layout and space for a 50-person orchestra and 200-person choir), a 500-seat chapel (for weddings, funerals, and special events), and a prayer room. The addition will connect to the existing church and create a Christian Commons for education, administration, music, and fellowship. The church asked for a modern design that uses traditional materials, such as stone, brick, and stained glass. Construction is scheduled to begin this summer.
| Feb 11, 2011
Apartment complex caters to University of Minnesota students
Twin Cities firm Elness Swenson Graham Architects designed the new Stadium Village Flats, in the University of Minnesota’s East Bank Campus, with students in mind. The $30 million, six-story residential/retail complex will include 120 furnished apartments with fitness rooms and lounges on each floor. More than 5,000 sf of first-floor retail space and two levels of below-ground parking will complete the complex. Opus AE Group Inc., based in Minneapolis, will provide structural engineering services.
| Feb 11, 2011
Four-story library at Salem State will hold half a million—get this—books!
Salem State University in Massachusetts broke ground on a new library and learning center in December. The new four-story library will include instructional labs, group study rooms, and a testing center. The modern, 124,000-sf design by Boston-based Shepley Bulfinch includes space for 500,000 books and study space for up to a thousand students. Sustainable features include geothermal heating and cooling, rainwater harvesting, and low-flow plumbing fixtures.
| Feb 11, 2011
Green design, white snow at Egyptian desert retail complex
The Mall of Egypt will be a 135,000-sm retail and entertainment complex in Cairo’s modern 6th of October district. The two-story center is divided into three themed zones—The City, which is arranged as a series of streets lined with retail and public spaces; The Desert Valley, which contains upscale department stores, international retailers, and a central courtyard for music and other cultural events; and The Crystal, which will include leisure and entertainment venues, including a cinema and indoor snow park. RTKL is designing the massive complex to LEED Silver standards.
| Feb 10, 2011
7 Things to Know About Impact Glazing and Fire-rated Glass
Back-to-basics answers to seven common questions about impact glazing and fire-rated glass.
| Feb 10, 2011
Medical Data Center Sets High Bar for BIM Design Team
The construction of a new data center becomes a test case for BIM’s ability to enhance project delivery across an entire medical campus.
| Feb 10, 2011
Zero Energy Buildings: When Do They Pay Off in a Hot and Humid Climate?
There’s lots of talk about zero energy as the next big milestone in green building. Realistically, how close are we to this ambitious goal? At this point, the strategies required to get to zero energy are relatively expensive. Only a few buildings, most of them 6,000 sf or less, mostly located in California and similar moderate climates, have hit the mark. What about larger buildings, commercial buildings, more problematic climates? Given the constraints of current technology and the comfort demands of building users, is zero energy a worthwhile investment for buildings in, for example, a warm, humid climate?
