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.” +

In its 2021 Life Sciences Real Estate Outlook, JLL predicted that access to talent would be a primary concern for an industry sector that had been growing by leaps and bounds. A year later, talent still guides real estate decisions. But market conditions of a different sort were cooling the biotech field: namely, investors that have soured on startups which underperformed after going public. What this means for new construction and renovation going forward is unpredictable, as the drivers behind life sciences’ surge are still palpable.