Economists from the AIA, the National Association of Home Builders, and the Associated Builders and Contractors convened this week to deliver a midyear status update on the health of the construction sector. While recovery among the market sub-categories—commercial/industrial, multifamily, institutional, and single-family residential—has largely been uneven and will continue to be, the economist trio forecasts growth across the sectors through 2017.

“Revenue at architecture firms continues to grow, so prospects for the construction industry remain solid over the next 12 to 18 months,” said AIA chief economist Kermit Baker, Hon. AIA, in a press release. “Given current demographic trends, the single-family residential and the institutional building sectors have the greatest potential for further expansion at present.”

From January to June of 2016, spending in the commercial/industrial sector was $113.2 billion, a 9.5 percent gain from the same period a year ago. Of that spending, lodging and office construction are up more than 20 percent each year-over-year, thanks to international capital flowing into the U.S. due to economic factors including the ‘Brexit’ decision in Europe and longtime low interest rates in the U.S. Commercial spending, which includes sub-categories such as retail, is projected to increase by just 6.5 percent from 2016 to 2017—roughly half of the prior year's gains and anticipated due to the projected slowdown in office construction in the next year.

In 2017, growth is expected to swing to the institutional sector, where spending is already up 3.2 percent in the first half of 2016 from the first half of 2015. Specifically, health care and education construction increased 2.2 percent to $19.6 billion and 6.2 percent to $41 billion, respectively, for the same period. Health care construction spending is expected to double in 2017.

“The demographics are incredibly favorable on the long run for health care,” the AIA's Baker said in a conference call on Monday discussing the mid-year forecast. “Seniors consume a lot of health care services, and as baby boomers are moving into their late 60s and 70s, we expect to see a lot of construction in the health care sector.

The hard-hit single-family residential sector has more than doubled spending since the market trough during the Great Recession, but it has a long way to go before reaching full recovery, the economists say. A combination of low lot supply, a shortage of skilled labor, and a tightening in financing is driving up housing costs and pricing many potential buyers—especially Millennials at the early stages of their careers and many with burdensome student debt—out of the housing market, according to the NAHB's cheif economist Robert Dietz.

Read more about Dietz's forecast and commentary about residential construction on our sister site BUILDER.