Leopardo Companies, a construction firm serving Chicago and the Midwest, has released its 2017 Construction Economics Report and Outlook, an in-depth analysis of factors that impact development, renovation and build-out costs in commercial facilities, including the office, industrial/manufacturing, retail, multifamily, healthcare and lodging sectors.
Nationally, year-over- year construction spending increased by 4.2 percent in December 2016, as total volume reached an estimated $1.182 trillion. The pace of growth, however, was less than in 2015, when volume increased by 8.7 percent. The slowdown in growth was due to firms pulling back on capital expenditures and speculative development amid concerns about the global economy, political uncertainty, volatility in energy prices, rising construction labor costs and a cautious environment for construction financing.
Chicago and suburban areas experienced construction gains in the office, industrial, healthcare and multifamily sectors, while volume was flat in the retail and homebuilding sectors. The Chicagoland market also saw a 1.4 percent drop in construction employment, compared to a national average increase of 2.2 percent. The loss of construction jobs exacerbates the challenge of rising labor costs in the sector, which will continue into 2017 and beyond.
“We expect to see the construction market resume its healthy pace of growth this year, after a slight slowdown in the second half of 2016 due in part to the uncertainty of the presidential election,” said Leopardo Vice President Mark Yanik. “Although it’s too soon to know the impact of the Trump administration on demand for commercial real estate, some early signs are potentially favorable to our industry, such as plans to withdraw from the Trans-Pacific Partnership, renegotiate the North American Free Trade Agreement, and ease banking regulations.”
Key findings in the report include:
Office construction spending grew 20.9 percent during 2016, driven by growth of the technology sector. Office space will continue to be in high demand in cities like Chicago that are well-suited to millennials’ desire for live-work- play neighborhoods. However, companies that are concerned about high labor cost are increasingly interested in lower-cost markets like Salt Lake City, Denver and San Antonio.
Construction spending in the U.S. manufacturing sector contracted 4.3 percent in 2016 after a record-setting 33.3 percent growth rate in 2015. In the Chicago area, however, industrial/manufacturing construction reached an all-time high last year, as record levels of net absorption reduced occupancies and increased rental rates across the region.
U.S. healthcare construction spending grew 1.7 percent to $41.4 billion by the end of 2016, down 5.4 percent from the previous year. Rising healthcare costs have prompted a shift from hospitals to outpatient facilities, driving demand for medical office buildings and helping to backfill vacancies in retail strip centers. This trend extends to the Chicago area, where new regional clinics are under way to be closer to patient populations.
Download the full 2017 Construction Economics Report and Outlook for free.
Related Stories
Designers | Dec 25, 2023
Redefining the workplace is a central theme in Gensler’s latest Design Report
The firm identifies eight mega trends that mostly stress human connections.
Contractors | Dec 12, 2023
The average U.S. contractor has 8.5 months worth of construction work in the pipeline, as of November 2023
Associated Builders and Contractors reported today that its Construction Backlog Indicator inched up to 8.5 months in November from 8.4 months in October, according to an ABC member survey conducted Nov. 20 to Dec. 4. The reading is down 0.7 months from November 2022.
Market Data | Nov 27, 2023
Number of employees returning to the office varies significantly by city
While the return-to-the-office trend is felt across the country, the percentage of employees moving back to their offices varies significantly according to geography, according to Eptura’s Q3 Workplace Index.
Market Data | Nov 14, 2023
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of September 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator declined to 8.4 months in October from 9.0 months in September, according to an ABC member survey conducted from Oct. 19 to Nov. 2. The reading is down 0.4 months from October 2022. Backlog now stands at its lowest level since the first quarter of 2022.
Multifamily Housing | Nov 9, 2023
Multifamily project completions forecast to slow starting 2026
Yardi Matrix has released its Q4 2023 Multifamily Supply Forecast, emphasizing a short-term spike and plateau of new construction.
Contractors | Nov 1, 2023
Nonresidential construction spending increases for the 16th straight month, in September 2023
National nonresidential construction spending increased 0.3% in September, 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 $1.1 trillion.
Market Data | Oct 23, 2023
New data finds that the majority of renters are cost-burdened
The most recent data derived from the 2022 Census American Community Survey reveals that the proportion of American renters facing housing cost burdens has reached its highest point since 2012, undoing the progress made in the ten years leading up to the pandemic.
Contractors | Oct 19, 2023
Crane Index indicates slowing private-sector construction
Private-sector construction in major North American cities is slowing, according to the latest RLB Crane Index. The number of tower cranes in use declined 10% since the first quarter of 2023. The index, compiled by consulting firm Rider Levett Bucknall (RLB), found that only two of 14 cities—Boston and Toronto—saw increased crane counts.
Market Data | Oct 2, 2023
Nonresidential construction spending rises 0.4% in August 2023, led by manufacturing and public works sectors
National nonresidential construction spending increased 0.4% in August, 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 $1.09 trillion.
Giants 400 | Sep 28, 2023
Top 100 University Building Construction Firms for 2023
Turner Construction, Whiting-Turner Contracting Co., STO Building Group, Suffolk Construction, and Skanska USA top BD+C's ranking of the nation's largest university sector contractors and construction management firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking includes revenue for all university/college-related buildings except student residence halls, sports/recreation facilities, laboratories, S+T-related buildings, parking facilities, and performing arts centers (revenue for those buildings are reported in their respective Giants 400 ranking).