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

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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.

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