The American Institute of Architects‘ semi-annual Construction Consensus Forecast (factoring in projections from Wells Fargo, Moodys.com and other groups) expects construction spending in the nonresidential market to increase by just over 8% this year. Heavy demand for hotels, offices, and manufacturing plans will lead the way, according to the report.
“While rising interest rates could pose a challenge to the U.S. economy, lower energy prices, improved employment figures and an enacted federal budget for 2016 are all factoring into a very favorable outlook for the construction industry,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “And after several years of challenging economic circumstances the institutional project sector is finally on very solid footing.”
Construction spending greatly exceeded expectations in the nonresidential market in 2015, the survey said, and this year should see healthy growth levels as well. The forecast said there continues to be significant demand for hotels, office space, manufacturing facilities and amusement and recreation spaces.
Nonresidential Construction Sectors
The AIA predicts a 12.8% increase this year compared with last in spending for office space; 11.9% for industrial facilities; and 7.5% for retail space. In fact, there’s no category that is predicting a decrease for, although spending on public safety is projected to rise only 1.8% year-over-year.
That’s quite a prediction, considering that most nonresidential markets had banner years in 2015, according to the US Census Bureau.
Still, the AIA forecast is conducted twice a year with nonresidential construction forecasters in the U.S., including Dodge Data & Analytics, Wells Fargo Securities, IHS-Global Insight, Moody’s, CMD Group, the Associated Builders & Contractors of America and FMI Group. It’s an amalgam of several forecasts so the optimism encompasses economists and forecasters from a very well-known group. It will be interesting to see how the markets react this year if any disruptions in oil — or other energy supply — cause prices to rise above the low levels most are taking as a given for the year. Remember that oil prices have a knock-on effect for the metals we track, all construction materials and all commodities.