Nonresidential construction spending, which rose by 3.5% in the second half of 2019, is expected to increase in 2020, albeit at a modest 2% clip, with demand projected to weaken as the year goes on.
In its Construction Outlook for the U.S. 2020, JLL attributed last year’s performance mostly to the 10.1% rise in public spending. Construction employment was up 2.1% to 6.44 million, and construction unemployment dipped to 4.5%. Indexed building costs increased 1.5% year-over-year.
In 2020, the dollar value of construction starts (according to Dodge Data & Analytics) is expected to decline by nearly 5%. And JLL expects the disparity between public and private nonres construction spending to continue.
With nearly all growth in construction spending coming from public dollars, the sectors expected to do well this year will be those with the most public investment, such as transportation, education, healthcare and public safety. The reverse will be true about multifamily residential, commercial office, hotels, and retail.
JLL forecasts construction inflation to fall somewhere between 1% and 3%, and by a bit higher percentages on the labor side.
Inflation in the cost of construction materials has been held in check.
JLL was reluctant to speculate on the impact of the coronavirus on construction. But it did note that roughly between one-quarter and one-third of all construction products in the U.S. are sourced from China, so any sustained slowdown in Chinese production due to the spread of COVID 19 may cause material shortages in the U.S.
The Outlook’s projections about the U.S. economy—that it would remain strong enough in 2020 to keep the construction industry on track overall, but would not provide the private investment fuel that would be necessary for robust growth—were made before the economy appeared to be sinking into recession in mid March.
On the plus side, the Outlook points out that the ratified U.S.-Mexico-Canada Agreement is on track to be fully implemented in 2020. “The agreement brings stability to critical material markets for the construction industry, particularly for lumber, steel and aluminum,” JLL posited. Across the Pacific, the U.S. and China signed a Phase One agreement to roll back a very small portion of the tariffs that were imposed between the two countries over the past few years. Phase One represents the first time under the Trump administration that average tariff rates on Chinese imports have declined.
Construction confidence was flat to down in 2019, according to several measurements.
Much of the Outlook was actually devoted to recounting key metrics from last year. It points out, for example, that construction confidence was flat in 2019, while the Commercial Construction Index, as aggregated by the U.S. Chamber of Commerce and USG, dropped in the fourth quarter to its lower level in three years.
Last year, the rate of increase for construction materials eased a bit, to 3%, with most of that increase occurring in the first half of the year. Steel-mill products, in fact, experienced a 14.2% decrease over the 12-month period.
The most expensive cities with more than 150,000 people to build in last year were the usual suspects: New York, San Francisco, Chicago, Honolulu, and Fairbanks, Alaska. The least expensive were Knoxville, Tenn., Austin, Amarillo, Texas, Little Rock, Ark., and El Paso, Texas.
JLL’s Outlook also provides regional comparisons for the years 2008 through 2019. In that context, for example, warehouses were the strongest construction sector in the Midwest and Northeast, Amusement & Recreation in the West, and Auto Service/Parts in the South. The sectors with the greatest decline over that decade were bank and financial offices (Northeast and South), Multiretail (West), and houses of worship (Midwest).
As for overall growth during this 10-year period. the Northeast, West, and Midwest fell short of the national average in terms of construction backlog, while the South outperformed the country as a whole.
Related Stories
Giants 400 | Sep 5, 2023
Top 80 Construction Management Firms for 2023
Alfa Tech, CBRE Group, Skyline Construction, Hill International, and JLL top the rankings of the nation's largest construction management (as agent) and program/project management firms for nonresidential buildings and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Sep 5, 2023
Top 150 Contractors for 2023
Turner Construction, STO Building Group, DPR Construction, Whiting-Turner Contracting Co., and Clark Group head the ranking of the nation's largest general contractors, CM at risk firms, and design-builders for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Market Data | Sep 5, 2023
Nonresidential construction spending increased 0.1% in July 2023
National nonresidential construction spending grew 0.1% in July, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.08 trillion and is up 16.5% year over year.
Giants 400 | Aug 31, 2023
Top 35 Engineering Architecture Firms for 2023
Jacobs, AECOM, Alfa Tech, Burns & McDonnell, and Ramboll top the rankings of the nation's largest engineering architecture (EA) firms for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Aug 22, 2023
Top 115 Architecture Engineering Firms for 2023
Stantec, HDR, Page, HOK, and Arcadis North America top the rankings of the nation's largest architecture engineering (AE) firms for nonresidential building and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Aug 22, 2023
2023 Giants 400 Report: Ranking the nation's largest architecture, engineering, and construction firms
A record 552 AEC firms submitted data for BD+C's 2023 Giants 400 Report. The final report includes 137 rankings across 25 building sectors and specialty categories.
Giants 400 | Aug 22, 2023
Top 175 Architecture Firms for 2023
Gensler, HKS, Perkins&Will, Corgan, and Perkins Eastman top the rankings of the nation's largest architecture firms for nonresidential building and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Apartments | Aug 22, 2023
Key takeaways from RCLCO's 2023 apartment renter preferences study
Gregg Logan, Managing Director of real estate consulting firm RCLCO, reveals the highlights of RCLCO's new research study, “2023 Rental Consumer Preferences Report.” Logan speaks with BD+C's Robert Cassidy.
Market Data | Aug 18, 2023
Construction soldiers on, despite rising materials and labor costs
Quarterly analyses from Skanska, Mortenson, and Gordian show nonresidential building still subject to materials and labor volatility, and regional disparities.
Apartments | Aug 14, 2023
Yardi Matrix updates near-term multifamily supply forecast
The multifamily housing supply could increase by up to nearly 7% by the end of 2023, states the latest Multifamily Supply Forecast from Yardi Matrix.