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GIO Looks at the Non-Residential Construction Market Forecast for 2020

building construction

As a company focused on commercial design, not only do we track style and design trends, but we also stay apprised of what’s happening on the construction side. Economic barometers play an important in role in how we prepare to supply and service our customers’ needs responsively. That’s why we stay closely attuned to nonresidential and commercial construction starts and forecasts.

Here’s a look at we can expect to see in non-residential construction in 2020.

Since the Great Recession, most construction market niches and regions of the United States have made a comeback to enjoy several years of steady growth. But many economists believe there could be a change of pace as many economic indicators point to a construction market that’s a bit slower than it has been the past few years. There are no catastrophic forecasts, but a noticeable slow down is expected. That said, each city or geographical region and key segments of the construction market will all likely have a different story to tell a year from now.

According to the mid-year AIA Consensus Construction Forecast* released in July 2019, spending on nonresidential building construction is expected to increase more than two percent in 2020. Commercial construction level (particularly for retail space) are in the midst of a broader slowdown, and industrial construction is seeing a very healthy rebound. While some individual construction sectors are projected to see declines over the next year, the consensus is that overall building construction activity will continue to expand. There won’t be a repeat of what the construction industry endured during the recession.

“Economic growth is slowing but is not anticipated to contract next year. Construction starts, therefore, will decline but the level of activity will remain close to recent highs. By major construction sector, the dollar value of starts for residential buildings will be down -6%, while starts for both nonresidential buildings and nonbuilding construction will drop -3%.” ~ Richard Branch, Chief Economist for Dodge Data & Analytics

Commercial facilities are expected to bear the brunt of the slowdown, with overall spending for commercial buildings projected to slow to 1.1 percent in 2020. In particular, retail construction is projected to see a modest decline this year and remain essentially flat next year. Hotel construction is expected to fare a bit better over the next year, and office construction even better thanks to the strong jobs market.

Commercial building starts were forecast to retreat 6% in dollar value in 2020, with the largest declines to occur in hotels and commercial warehouses.  Retail activity will also fall in 2020, a continuation of an ongoing trend.

2020 institutional construction starts should remain even with the 2019 level.  Declines in recreation and transportation buildings will offset modest growth in education building and health facility starts.

Rising trade tensions have caused the manufacturing plant construction to decrease with recent data suggesting the manufacturing sector is in contraction. Public works construction starts are expected to increase across all project types — recent federal appropriations have kept funding for public works construction steady or slightly higher.

*The AIA Consensus Construction Forecast is a twice-a-year survey of the nation’s leading construction economists who forecast business conditions over the next 12–18 months. The report averages the forecasts of eight leading construction forecasting firms — Dodge Data & Analytics, IHS Economics, Moody’s Economy.com, FMI, ConstructConnect, Associated Builders and Contractors, Wells Fargo Securities, and Markstein Advisors.

 

Resources: AIA Consensus Construction Forecst and 2020 Dodge Connstruction Outlook.

GIO: BUSINESS INTELLIGENCE, SOLUTIONS SAVVYWe consistently seek market data to best prepare and respond to the specific needs of the commercial architectural and interior design communities. Feel free to connect with your GIO sales representative for insights and ideas for taking your upcoming commercial building or renovation projects to the next level with superior tile selections.

GIO Looks at Non-Residential Construction – 2017 Overview, 2018 Predictions

commercial construction

As a company focused on commercial design, not only do we track style trends, we also we stay apprised of what’s happening on the construction side. We feel it is important for us to stay attuned to the nonresidential construction starts and forecasts in order to prepare to supply and service your needs responsively.

Here’s a look at what happened in nonresidential construction over the past year and what we can look forward to in 2018.

Construction Spending

When looking at construction in 2017, it’s helpful to get a little perspective by looking a little further back to previous years. Total construction spending in 2016 increased 6.5% from the previous year. 2015 construction spending increased 10.7%, and in 2014 spending was up nearly 11%. And while 2017 isn’t quite finished, The AIA’s Consensus Construction Forecast Panel predicts construction spending on nonresidential buildings to increase 3.8%. Commercial construction spending is expected to see an 8.8% increase for the year, while Industrial construction spending is predicted to see a decrease of 6.6%.

Construction Starts

According to ConstructConnect, construction starts increased 13.2% from 2015 to 2016. 2015 saw a similar 13.6% increase in construction starts. ConstructConnect’s forecast for construction starts in 2017 is a 7.9% growth over 2016.

Construction Starts & Spending Forecast for 2018

Construction starts and spending are expected to stay strong in the coming year, but the amount of growth should be a little more subdued. ConstructConnect’s forecasts construction starts to increase 4.8% iin 2018. Commercial construction (offices, parking garages and transportation terminals) is expected to have a 12.4% increase.

According to AIA’s Consensus Construction Forecast Panel, nonresidential buildings construction spending will increase 3.6% in 2018. Commercial construction spending is only expected about a 4.0% increase, which less than half the growth expected for this year.

Residential construction, especially single-family construction, is expected to remain strong in 2018 especially if millennials decide to become homeowners. Lodging construction (hotels and motel), is expected to be down in 2018 after experiencing growth in 2017. Retail construction will continue to decline in 2018 thanks to ecommerce and its effects on brick-and-mortar stores. Though public construction declined in 2017, we should see spending expansion in terminals and runways, as well as public education.

The overall outlook for the construction industry in 2018 is positive. That design firms are seeing healthy conditions and experiencing positive growth is an indicator of continued construction growth in the coming year.

GIO Tile consistently seeks market data to best prepare and respond to the specific needs of the commercial architectural and interior design communities. Feel free to connect with your GIO sales representative for insights and ideas for taking your upcoming commercial building or renovation projects to the next level with superior tile selections.

GIO Looks at Non-Residential Construction Starts – 2017 1st Quarter Overview

construction site with cranes

Because GIO offers tile and stone products developed expressly for commercial design projects, we keep our eyes on coming and going design trends and materials preferences in the commercial sector. Economic barometers also play an important in role in how we prepare to supply and service our customers’ needs; that’s why we stay closely attuned to nonresidential and commercial construction starts and forecasts.

Here’s a look at what has transpired so far in 2017 on the nonresidential construction side.

January 2017 Construction Starts

In January, the value of new construction starts rose 12% to a seasonally adjusted annual rate of $690.2 billion. This figure is a 3%  decrease compared January a year ago, but it’s worth noting that the 2016 amounts included the often volatile manufacturing plant and electric utility/gas plant categories. If manufacturing plants and electric utilities/gas plants are excluded, total construction starts in January this year would be up 10% from January 2016.

Institutional Building

After losing momentum during last year’s fourth quarter, nonresidential building strengthened in January, climbing 16% to $261.5 billion, thanks in part to the inclusion of the $3.4 billion Central Terminal Building project at LaGuardia Airport. This increase created a 37% gain for the institutional categories as a group. The building of healthcare facilities advanced, rising 6% and the public buildings category rose 1%. On the down side of the, declines were reported for educational facilities (down 18%), amusement-related work (down 36%), and religious buildings (down 44%.).

Commercial Building

In January, the commercial side as a group of the nonresidential building market grew 12%. Within the group, office construction starts climbed 26%, and hotel construction rose 5%. On the negative side, some categories in the commercial group did not fare so well, with store construction declining 1% and commercial garages down by 7%. The manufacturing plant category in January plunged 69%. But in all fairness, the 69% plunge was relative to December, which included the start of a $1.2 billion pharmaceutical plant.

February 2017 Construction Starts

In February, new construction starts as a whole increased 2% from the previous month. Total construction starts on an unadjusted basis were $98.5 billion, down 4% from this month a year ago, but if we exclude manufacturing plants and electric utilities/gas plants, total construction starts during this year’s January-February period would be up 7% compared to last year.

Institutional Building

Nonresidential building starts dropped 9% in February to $238.5 billion (annual rate). Construction starts for the institutional categories as a group decreased 14%. Starts for the public buildings category (courthouses and detention facilities) retreated by 30%. On the positive side, the amusement and recreation category increased 101% due in part to the $562 million sports arena portion of the Chase Center project in San Francisco. Educational facilities construction starts improved 12% and healthcare facilities starts increased 4%.

Commercial Building

On the commercial side, nonresidential building starts fell 11% with office construction dropping 40% following the strong January performance, though February did include the start of several noteworthy office projects. Construction start for commercial garage declined 17%, and hotels were down 3%. On the plus side, warehouse starts increased 7%, stores were up 7%, and the manufacturing building category in February surged 147%  thanks to the start of a $985 million refinery modernization and a $100 million Mercedes Benz van manufacturing facility.

March 2017 Construction Starts

in March, new construction starts as a whole increased 5 percent to a seasonally adjusted annual rate of $743.7 billion, but nonresidential building remained unchanged from its February pace at $237.2 billion. But as a whole, nonresidential building starts held steady because strong activity for office buildings and airport terminals offset a steep drop for manufacturing plants.

Through the first three months of 2017, total construction starts on an unadjusted basis were $160.1 billion, down 3% from the same period a year ago (which included heightened activity for manufacturing plants and electric utilities/gas plants). If we  exclude manufacturing plant and electric utility/gas plant categories, total construction starts during the first three months of 2017 would be up 8% from last year.

Institutional Building

On the institutional side, construction starts for the nonresidential building market grew 3%, with much of that coming from an 83% increase for the transportation terminal category. Construction starts for religious buildings were up 9%, and public buildings (courthouses and detention centers) increased 4%. On the down side, educational facilities dropped 14% , although March did include the starts of some noteworthy educational facility projects.

Commercial Building

The nonresidential building market increased 7% on the commercial side, with office construction climbing 41% thanks to the start of five projects valued each in excess of $100 million. Commercial garages rose 12%, but on the negative side, construction starts for hotels declined 7%, stores and shopping center starts were down 8%,  and warehouse starts decreased 14%. Starts for manufacturing plants plunged 65%.

1st Quarter 2017 Construction Starts Summary

Compared to the same period last year, nonresidential building starts as a whole increased by 7%  in the first quarter of 2017, with institutional building starts up 35%, commercial building down 9%, and manufacturing building down 44%. Geographically, total construction starts in the first three months of 2017 showed reduced activity relative to last year in two regions. Construction starts in the South Central declined 26% and were down 3% in the Northeast. Total construction gains year-to-date were reported in the West (up 1%), the South Atlantic (up 11%), and the Midwest (up 12%).

Last 12 Months Construction Starts

To gain even better perspective, it helps to look at the past 12 months ending March 2017 compared to the 12 months ending March 2016. On this 12-month basis, total construction starts were up 2%. Nonresidential building as a whole increased 7%, with institutional building advancing 14%, commercial building increasing 7%, and manufacturing building decreasing 26%.

 

GIO: BUSINESS INTELLIGENCE, SOLUTIONS SAVVY

We consistently seek market data to best prepare and respond to the specific needs of the commercial architectural and interior design communities. Feel free to connect with your GIO sales representative for insights and ideas for taking your upcoming commercial building or renovation projects to the next level with superior tile selections.

Source: Dodge Data & Analytics