flexiblefullpage -
billboard - default
interstitial1 - interstitial
Currently Reading

2021 won’t be a growth year for construction spending, says latest JLL forecast

Market Data

2021 won’t be a growth year for construction spending, says latest JLL forecast

Predicts second-half improvement toward normalization next year.


By John Caulfield, Senior Editor | February 24, 2021
The Grand, a mixed-use project in Los Angeles

Downtown Los Angeles has $3 billion in new construction projects under development, including The Grand, a mixed-used 1.2-million-sf public-private partnership that Related Cos. is developing, according to a new report from the Downtown Center Business Improvement District.  However, JLL's latest Construction Forecast predicts a slow recovery in construction spending nationwide. Image: Related Companies

Last year’s boon in single-family housing construction will have an impact on the availability and cost of building materials for nonresidential construction in 2021, which is expected to be a year of “decreasing work volume,” according to JLL’s latest Construction Forecast being released today.

Nonresidential starts were down 24% last year, and are expected to decline again in 2021. Yet, JLL sees an industry that has become more resilient and better positioned to function during the pandemic recovery.

 

Healthcare and industrial should be the growth winners in construction spending this year. Chart: JLL

 

This recovery won’t be like the last one during the Great Recession in the late 2000s. For one thing, the range between sector forecasts is wider.

JLL analyzed three indicators of future growth: construction starts, construction industry sentiment, and forecast construction spending across nine nonresidential sectors.  The clear winners, in its estimation, will be distribution and healthcare. The clear stragglers: hotels and entertainment. The office sector shows the least consensus.

 

LUMBER PRICING WILL CONTINUE TO BE VOLATILE

The boon in new-home construction is having an impact on overall construction costs. Chart: JLL

 

In addition, this has not been a total construction shutdown. Single-family housing starts increased by 11% last year, and have continued to grow since last May. (According to the latest Census Bureau estimates, single-family starts in January, at an annualized rate of 1,269,000 units, were up 29.9% over the same month in 2020.)

Residential construction employment was also up last year, by 1.2%, while nonres construction employment dipped 3.9%. That growth is affecting labor and materials markets. “The growth in residential is the primary cause of our forecast for elevated cost inflation in the coming year,” states JLL.

This year, it predicts that construction cost increases will be in the higher range between 3.5% and 5.5%. Labor costs will be up in the 2-5% range. Material costs will rise 4-6% and volatility “will remain elevated.” Nonres construction spending will stabilize from the early stages of the pandemic, but still decline between 5% and 8%, although JLL foresees an upswing in the third and fourth quarter, and more typical industry growth in 2022.

One silver lining from the pandemic is that it “spurred three years of construction tech adoption to be condensed into the last nine months of 2020,” observes JLL. It cites a recent Associated General Contractors survey that found contractors planning to increase their spending for all 14 ConTech categories listed.

Labor demand should also continue, although the key to any construction recovery, states JLL, will be how quickly the population is vaccinated against COVID-19. The industry’s labor shortage was a big enough buffer to absorb some of the pandemic’s shock, and through the entire post-pandemic period “there have been more active job openings in construction than at the peak of the last expansion in 2006-2007.”

As for materials pricing, volatility will affect lumber, plywood, copper and brass mill shapes. The least volatile, price-wise, should be concrete, flat glass, insulation, and plastic construction products.

 

Lumber and plywood pricing is expected to remain unpredictable. Chart: JLL

 

NEW ADMINISTRATION COULD SHAKE UP CONSTRUCTION

JLL weighed in on the potential impact of the Biden Administration on the construction industry. The next stimulus package, if passed by Congress, should keep the economy’s growth from reversing. A large infrastructure bill “is a good possibility later this year,” which JLL thinks could be an “accelerant” to construction inflation.

Interestingly, JLL doesn’t think either a reduction in immigration restrictions or an increase in the minimum wage to $15 per hour would have a substantive impact on projects, wages, or costs, except in states like Texas where construction wages are lower than the federal rate. 

Related Stories

Market Data | May 18, 2022

Architecture Billings Index moderates slightly, remains strong

For the fifteenth consecutive month architecture firms reported increasing demand for design services in April, according to a new report today from The American Institute of Architects (AIA).

Market Data | May 12, 2022

Monthly construction input prices increase in April

Construction input prices increased 0.8% in April compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today.

Market Data | May 10, 2022

Hybrid work could result in 20% less demand for office space

Global office demand could drop by between 10% and 20% as companies continue to develop policies around hybrid work arrangements, a Barclays analyst recently stated on CNBC.

Market Data | May 6, 2022

Nonresidential construction spending down 1% in March

National nonresidential construction spending was down 0.8% in March, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau.

Market Data | Apr 29, 2022

Global forces push construction prices higher

Consigli’s latest forecast predicts high single-digit increases for this year.

Market Data | Apr 29, 2022

U.S. economy contracts, investment in structures down, says ABC

The U.S. economy contracted at a 1.4% annualized rate during the first quarter of 2022.

Market Data | Apr 20, 2022

Pace of demand for design services rapidly accelerates

Demand for design services in March expanded sharply from February according to a new report today from The American Institute of Architects (AIA).  

Market Data | Apr 14, 2022

FMI 2022 construction spending forecast: 7% growth despite economic turmoil

Growth will be offset by inflation, supply chain snarls, a shortage of workers, project delays, and economic turmoil caused by international events such as the Russia-Ukraine war.

Industrial Facility | Apr 14, 2022

JLL's take on the race for industrial space

In the previous decade, the inventory of industrial space couldn’t keep up with demand that was driven by the dual surges of the coronavirus and online shopping. Vacancies declined and rents rose. JLL has just published a research report on this sector called “The Race for Industrial Space.” Mehtab Randhawa, JLL’s Americas Head of Industrial Research, shares the highlights of a new report on the industrial sector's growth.

Codes and Standards | Apr 4, 2022

Construction of industrial space continues robust growth

Construction and development of new industrial space in the U.S. remains robust, with all signs pointing to another big year in this market segment

boombox1 - default
boombox2 -
native1 -

More In Category




halfpage1 -

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021

 


Magazine Subscription
Subscribe

Get our Newsletters

Each day, our editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Subscribe

Follow BD+C: