Nonres construction spending to increase through 2012, growth projected for 2013

Even with the myriad of obstacles preventing a full scale recovery for the overall U.S. economy, the design and construction industry appears to have reasons to be at least modestly optimistic in the coming months and into next year.

A sharp spike in demand for industrial facilities so far this year, along with sustained demand for hotels and retail projects factors into what projects to be a 4.4% rise in spending this year for nonresidential construction projects – up from a projection of a 2.1% increase in the January Consensus Forecast.

The American Institute of Architects (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, also projects a 6.2% increase of spending in 2013.

“With companies looking to bring back manufacturing jobs from overseas, there has been a sharp rise in demand for industrial facilities, which is leading to an upward revision in projections for future construction spending,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Continued budget shortfalls at the state and local level, along with a depressed municipal bond market are holding the institutional market back from seeing similar upticks in spending.”

Market Segment Consensus Growth Forecasts	2012	2013
Overall nonresidential	4.4%	6.20%
Commercial / industrial	5.7%	10.20%
Industrial	12.9%	8.10%
Hotels	9.5%	18.20%
Retail	6.2%	9.00%
Office buildings	4.7%	8.70%
Institutional	0.7%	3.00%
Healthcare facilities	4.0%	7.50%
Education	0.3%	1.10%
Amusement / recreation	0.1%	2.30%
Public safety	0.0%	0.10%
Religious	-5.0%	3.00%

Remarking on what risks exist that could undermine these projections, Baker added, “Federal tax and spending changes – the so-called fiscal cliff – that may come into play in early 2013 could upset the economic applecart and prove detrimental to recovery possibilities. We will likely have a better sense after the presidential election what will happen with regards to the Bush-era tax cuts, Social Security payroll tax, extended unemployment, and deficit reduction plans that will have a ripple effect that will extend to the construction industry.” +

Boyd R. Zoccola is Chair and Chief Elected Officer of BOMA International. A BOMA member since 1994, he has served on the Executive, Finance, Investment, and Medical/Healthcare Facilities Committees. An Indiana Real Estate Principal Broker and a board member of the Real Estate Round Table, he is Executive Vice President of Hokanson Companies, Inc., of Indianapolis, and has been involved in the development of $600 million worth of real estate. On a volunteer basis, Zoccola was president of Horizon House and a board member of Girls, Inc. He holds a BA in biology from Indiana University.