Nonresidential construction spending could slow down in the coming year in the wake of a turbulent global economy and uncertainty around the upcoming U.S. presidential election, according to the AIA’s latest semi-annual Consensus Construction Forecast, released this week. The survey of the country’s leading construction-market forecasters projects spending growth of 5.8 percent for nonresidential building in 2016 and of 5.6 percent for the same category in 2017; within that figure, forecasters expect spending in the commercial/industrial sub-sector to increase by 11.7 percent in 2016 and 6.5 percent in 2017.
Demand for hotels, offices, and amusement and recreation spaces will spur construction spending this year, the report finds. In addition, the U.S. economy's recovery—in particular, a rebounding job market and an expected boost in construction hiring that ARCHITECT recently reported on—will further sustain the nonresidential construction field.
“Healthy job growth, strong consumer confidence, and low interest rates are several positive factors in the economy, which will allow some of the pent-up demand from the last downturn to go forward,” said AIA chief economist, Kermit Baker, Hon. AIA, in a press release. "But at the same time, the slowing in the overall economy could extend to the construction industry a bit, with the biggest drop-off expected in the industrial facility sector over the next year and a half."
Source: AIA Consensus Construction Forecast
Baker notes the "ripple effect" from the Brexit decision, uncertainty in the wake of the U.S. presidential election, and weak U.S. manufacturing as reasons for the projected slowdown in the recent project spending increases headed into 2017.
The report follows the release last week of the June iteration of the AIA's monthly Architectural Billings Index (ABI). The ABI began 2016 in negative territory but rebounded to reach a 10-month high in May. Next week's release of two key, monthly economic indicators focused on employment and hiring—one from payroll processing company ADP and its partner Moody’s Analytics and the other from the Bureau of Labor Statistics—will offer additional details about the labor situation in construction.
