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
Giants 400 | Aug 22, 2023
2023 Giants 400 Report: Ranking the nation's largest architecture, engineering, and construction firms
A record 552 AEC firms submitted data for BD+C's 2023 Giants 400 Report. The final report includes 137 rankings across 25 building sectors and specialty categories.
Giants 400 | Aug 22, 2023
Top 175 Architecture Firms for 2023
Gensler, HKS, Perkins&Will, Corgan, and Perkins Eastman top the rankings of the nation's largest architecture firms for nonresidential building and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Apartments | Aug 22, 2023
Key takeaways from RCLCO's 2023 apartment renter preferences study
Gregg Logan, Managing Director of real estate consulting firm RCLCO, reveals the highlights of RCLCO's new research study, “2023 Rental Consumer Preferences Report.” Logan speaks with BD+C's Robert Cassidy.
Market Data | Aug 18, 2023
Construction soldiers on, despite rising materials and labor costs
Quarterly analyses from Skanska, Mortenson, and Gordian show nonresidential building still subject to materials and labor volatility, and regional disparities.
Apartments | Aug 14, 2023
Yardi Matrix updates near-term multifamily supply forecast
The multifamily housing supply could increase by up to nearly 7% by the end of 2023, states the latest Multifamily Supply Forecast from Yardi Matrix.
Hotel Facilities | Aug 2, 2023
Top 5 markets for hotel construction
According to the United States Construction Pipeline Trend Report by Lodging Econometrics (LE) for Q2 2023, the five markets with the largest hotel construction pipelines are Dallas with a record-high 184 projects/21,501 rooms, Atlanta with 141 projects/17,993 rooms, Phoenix with 119 projects/16,107 rooms, Nashville with 116 projects/15,346 rooms, and Los Angeles with 112 projects/17,797 rooms.
Market Data | Aug 1, 2023
Nonresidential construction spending increases slightly in June
National nonresidential construction spending increased 0.1% in June, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. Spending is up 18% over the past 12 months. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.07 trillion in June.
Hotel Facilities | Jul 27, 2023
U.S. hotel construction pipeline remains steady with 5,572 projects in the works
The hotel construction pipeline grew incrementally in Q2 2023 as developers and franchise companies push through short-term challenges while envisioning long-term prospects, according to Lodging Econometrics.
Hotel Facilities | Jul 26, 2023
Hospitality building construction costs for 2023
Data from Gordian breaks down the average cost per square foot for 15-story hotels, restaurants, fast food restaurants, and movie theaters across 10 U.S. cities: Boston, Chicago, Las Vegas, Los Angeles, Miami, New Orleans, New York, Phoenix, Seattle, and Washington, D.C.
Market Data | Jul 24, 2023
Leading economists call for 2% increase in building construction spending in 2024
Following a 19.7% surge in spending for commercial, institutional, and industrial buildings in 2023, leading construction industry economists expect spending growth to come back to earth in 2024, according to the July 2023 AIA Consensus Construction Forecast Panel.