Despite looming economic concerns and nearing the tail end of an extended growth cycle, the nonresidential buildings industry continues to march ahead with no major slowdown in sight, according to a panel of economists.
The AIA Consensus Construction Forecast—which consists of economic forecasts from Associated Builders and Contractors, ConstructConnect, Dodge Data & Analytics, FMI, IHS Economics, Moody’s, and Wells Fargo Securities—is projecting 4.7% growth in nonresidential construction spending in 2018 and a 4.0% rise in 2019. Both forecasts are up from the panel’s initial estimate (4.0% and 3.9%) at the beginning of the year.
“At the halfway point of the year, this panel is even more optimistic,” said Kermit Baker, PhD, Hon. AIA, Chief Economist at the American Institute of Architects. “If these projections materialize, by the end of next year the industry will have seen nine years of consecutive growth, and total spending on nonresidential buildings will be 5% greater—ignoring inflationary adjustments—than the last market peak
of 2008.”
At the midpoint of the year, the AIA Consensus Construction Forecast Panel upgraded its 2018 and 2019 outlook for the nonresidential construction industry.
Baker and the other economists point to several bright spots for the market:
• The commercial sector continues to overperform. With numbers strong through the first half of the year, the consensus is that spending on commercial buildings will increase 6.7% this year (up from 4.4% projected at the beginning of the year), and 3.4% next year (up from 2.9%).
• More optimism surrounding institutional building activity, with a modest uptick in the forecast.
• Growing workloads at architecture firms. Firms saw healthy growth in both ongoing billings and new project activity last year, and the pace of gains for both of these indicators has remained strong through the first half of 2018.
• Business confidence levels are at their highest scores since 2004. Businesses are generally seeing a more accommodative regulatory environment, and have seen healthy growth in corporate profits.
• Consumer sentiment scores are at their highest level since 2000. The economy is on pace to add almost 2.6 million net new payroll positions this year, exceeding the 2.2 million that were added in 2017.
Related Stories
Market Data | Jan 22, 2020
Architecture Billings Index ends year on positive note
AIA’s Architecture Billings Index (ABI) score of 52.5 for December reflects an increase in design services provided by U.S. architecture firms.
AEC Tech | Jan 16, 2020
EC firms with a clear ‘digital roadmap’ should excel in 2020
Deloitte, in new report, lays out a risk mitigation strategy that relies on tech.
Market Data | Jan 13, 2020
Construction employment increases by 20,000 in December and 151,000 in 2019
Survey finds optimism about 2020 along with even tighter labor supply as construction unemployment sets record December low.
Market Data | Jan 10, 2020
North America’s office market should enjoy continued expansion in 2020
Brokers and analysts at two major CRE firms observe that tenants are taking longer to make lease decisions.
Market Data | Dec 17, 2019
Architecture Billings Index continues to show modest growth
AIA’s Architecture Billings Index (ABI) score of 51.9 for November reflects an increase in design services provided by U.S. architecture firms.
Market Data | Dec 12, 2019
2019 sets new record for supertall building completion
Overall, the number of completed buildings of at least 200 meters in 2019 declined by 13.7%.
Market Data | Dec 4, 2019
Nonresidential construction spending falls in October
Private nonresidential spending fell 1.2% on a monthly basis and is down 4.3% from October 2018.
Market Data | Nov 25, 2019
Office construction lifts U.S. asking rental rate, but slowing absorption in Q3 raises concerns
12-month net absorption decelerates by one-third from 2018 total.
Market Data | Nov 22, 2019
Architecture Billings Index rebounds after two down months
The Architecture Billings Index (ABI) score in October is 52.0.
Market Data | Nov 14, 2019
Construction input prices unchanged in October
Nonresidential construction input prices fell 0.1% for the month and are down 2.0% compared to the same time last year.