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 | Mar 22, 2018
Architecture billings continue to hold positive in 2018
Billings particularly strong at firms in the West and Midwest regions.
Market Data | Mar 21, 2018
Construction employment increases in 248 metro areas as new metal tariffs threaten future sector job gains
Riverside-San Bernardino-Ontario, Calif., and Merced, Calif., experience largest year-over-year gains; Baton Rouge, La., and Auburn-Opelika, Ala., have biggest annual declines in construction employment.
Market Data | Mar 19, 2018
ABC's Construction Backlog Indicator hits a new high: 2018 poised to be a very strong year for construction spending
CBI is up by 1.36 months, or 16.3%, on a year-over-year basis.
Market Data | Mar 15, 2018
ABC: Construction materials prices continue to expand briskly in February
Compared to February 2017, prices are up 5.2%.
Market Data | Mar 14, 2018
AGC: Tariff increases threaten to make many project unaffordable
Construction costs escalated in February, driven by price increases for a wide range of building materials, including steel and aluminum.
Market Data | Mar 12, 2018
Construction employers add 61,000 jobs in February and 254,000 over the year
Hourly earnings rise 3.3% as sector strives to draw in new workers.
Steel Buildings | Mar 9, 2018
New steel and aluminum tariffs will hurt construction firms by raising materials costs; potential trade war will dampen demand, says AGC of America
Independent studies suggest the construction industry could lose nearly 30,000 jobs as a result of administration's new tariffs as many firms will be forced to absorb increased costs.
Market Data | Mar 8, 2018
Prioritizing your marketing initiatives
It’s time to take a comprehensive look at your plans and figure out the best way to get from Point A to Point B.
Market Data | Mar 6, 2018
Persistent workforce shortages challenge commercial construction industry as U.S. building demands continue to grow
To increase jobsite efficiency and improve labor productivity, increasingly more builders are turning to alternative construction solutions.
Market Data | Mar 2, 2018
Nonresidential construction spending dips slightly in January
Private nonresidential construction fell 1.5% for the month, while public sector nonresidential spending increased 1.9%.