Slowing demand at architecture firms last year is expected to contribute to a projected 5.7% decline in construction spending for 2021, according to a new consensus forecast from The American Institute of Architects (AIA).
The AIA Consensus Construction Forecast Panel—comprised of leading economic forecasters—expects steep declines this year in construction spending on office buildings, hotels, and amusement and recreation centers. Health care and public safety are the only major sectors that are slated to produce gains in 2021.
Growth in nonresidential construction is expected for 2022, with 3% gains projected for the overall building market matched by both the commercial and institutional sectors.
“The December jobs report confirmed that the economy needs additional support in order to move to a sustainable economic expansion,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “As pandemic concerns begin to wane and economic activity begins to pick up later in 2021, there is likely to be considerable pent-up demand for nonresidential space, leading to anticipated growth in construction spending in 2022.”
CLICK CHART TO LAUNCH INTERACTIVE CHART FROM AIA
Here are some takeaways from AIA's Chief Economist Kermit Baker, Hon. AIA:
• Hotel, airlines, and recreation industry jobs have been decimated by the pandemic. "The December jobs report confirmed that the economy needs additional support in order to move to a sustainable economic expansion. Of particular concern were the 500,000 payroll positions lost in the leisure and hospitality sector. That means that this sector has lost almost 25% of payroll positions since February 2020, matching losses in the airline industry."
• The $900 billion stimulus package passed in December 2020 is not nearly enough to sustain economic growth. "Key elements of this package include another $600 in direct payments to qualifying individuals, $300 per week in supplemental unemployment insurance for up to 11 weeks, and $280 billion designated for the Paycheck Protection Program, which provided incentives for small businesses to keep employees on their payrolls. These initiatives were generally very effective in providing a safety net for impacted households and small businesses last spring. However, they weren’t designed to provide sufficient support for an extended period of economic weakness, and the December jobs report suggests that we may already be heading into another down cycle. Even this additional funding is unlikely to provide sufficient financial support for economic growth through the entire vaccination period, suggesting that even more stimulus will be needed in the coming months or else our economy likely will be in for an extended period of stagnant growth or modest declines."
• Biden win bodes well for infrastructure investment. "With the two Georgia senate seats now in the democratic column, there are a new set of policy options for the Biden administration. Still, given the razor thin margins in both the House and the Senate, programs likely to be enacted will need to have at least modest levels of bipartisan support. An infrastructure program is likely near the top of the list of programs that both parties could support, and the Biden Administration seems ready to make this a priority, in part because it would be viewed as a stimulus program, but also because borrowing costs are near historical lows."
• Architecture firms are seeing more positive signs for the long-term. "Project inquiries from prospective and former clients have been strong recently, suggesting that new work may be picking up. More concretely, new design work coming into architecture firms has generally been more positive than billings in recent months, suggesting that firms are bringing in more project activity than they are completing. However, firms are seeing different business conditions regionally. Firms in the northeast saw the steepest downturns as the pandemic hit, and conditions remained the weakest for the remainder of the year. Business conditions at firms in the other three regions – all modestly declining – are fairly comparable."
Related Stories
High-rise Construction | May 18, 2018
The 100 tallest buildings ever conventionally demolished
The list comes from a recent CTBUH study.
Resiliency | May 17, 2018
Architects brief lawmakers and policy-makers on disaster recovery as hurricane season approaches
Urge senate passage of disaster recovery reform act; Relationship-building with local communities.
Market Data | May 17, 2018
These 25 cities have the highest urban infill development potential
The results stem from a COMMERCIALCafé study.
Market Data | May 10, 2018
Construction costs surge in April as new tariffs and other trade measures lead to significant increases in materials prices
Association officials warn that the new tariffs and resulting price spikes have the potential to undermine benefits of tax and regulatory reform, urge administration to reconsider.
Market Data | May 7, 2018
Construction employers add 17,000 jobs in April and 257,000 for the year
Unemployment rate for construction increases slightly compared to year earlier as higher pay levels appears to be attracting people with recent construction experience back into the workforce.
Market Data | May 2, 2018
Construction employment increases in 245 metro areas between March 2017 & 2018, as trade fights & infrastructure funding shortfalls loom
Houston-The Woodlands-Sugar Land, Texas and Weirton-Steubenville, W.Va.-Ohio experience largest year-over-year gains; Baton Rouge, La. and Auburn-Opelika, Ala. have biggest annual declines.
Market Data | May 2, 2018
Nonresidential Construction down in March, private sector falters, public sector unchanged
February’s spending estimate was revised roughly $10 billion higher.
Market Data | Apr 30, 2018
Outlook mixed for renewable energy installations in Middle East and Africa region
Several major MEA countries are actively supporting the growth of renewable energy.
Market Data | Apr 12, 2018
Construction costs climb in March as wide range of input costs jump
Association officials urge Trump administration, congress to fund infrastructure adequately as better way to stimulate demand than tariffs that impose steep costs on contractors and project owners.
Market Data | Apr 9, 2018
Construction employers add 228,000 jobs over the year despite dip in March
Average hourly earnings increase to $29.43 in construction, topping private sector by nearly 10%; Association officials urge updating and better funding programs to train workers for construction jobs.
