The value of construction starts will increase by 6.5% in 2016 to $562 billion, according to the latest projections from CMD Group and Oxford Economics. And the nonresidential building portion of that total is expected to rebound from its decline in 2015 and show single-digit growth this year.
CMD/Oxford estimates that the dollar volume of nonresidential building (which was off by 3% in 2015) will increase by 3.5% to $193 billion this year. That compares to the 12.9% gain, to $247 billion, that CMD/Oxford anticipates for residential building, and the 0.4% decline, to $122 billion, for engineering/civil construction.
The country’s GDP is expected to inch up by 2.4% this year.
CMD/Oxford expects nonresidential building to rise to by 5.1% to $203 billion in 2017, and to hit $222.7 billion by 2020.
After a down year in 2015, nonresidential building is expected to ease upward this year, driven by low umemployment, borrowing costs, and output trends in relevant sectors. Chart: CMD Group
The short-term drivers of nonresidential building are expected to include the country’s unemployment rate, which CMD/Oxford forecasts will fall to 4.8% this year. Other variables that should contribute to the growth of nonres building are population trends (CMD/Oxford estimates another year of 0.8% growth), improvements in the outputs in certain sectors, and the still-low cost of borrowing money for construciton and investment.
Alex Carrick, CMD’s chief economist, notes that the depreciation of the U.S. dollar is likely to “blunt” industrial starts. On the other hand, increased state and federal spending on infrastructure projects and an improved investment outlook are expected to bolster the values of nonresidential building.
Broken down by sector, CMD/Oxford sees the value of construction for retail and offices easing upward from this year through 2020. Hotel/motel building will be essentially flat. Manufacturing could take a sharp dip this year, and then recover over the proceeding four years. Warehouse construction will be down slightly in 2016, but bounce back in the out years. Medical starts, which are expected to increase by 8.6% in 2016, will then settle around 5% annual growth from 2017 to 2020, as they ride the crest of an aging population.
CMD/Oxford also breaks down nonresidential building by that industry’s four largest states. Texas will be slightly down in 2016 and then flatten with modest increases over the next few years. After a decline in 2015, California’s nonres construction value will move upward, with a particularly strong rise expected for 2020. New York, which was also down in 2015, should see gains, whereas Florida should enjoy about a $1.5 billion jump in values in 2016, and then level off a bit.
Medical building should be one of the bright spots for nonresidential builidng, which is expected to stay positive over the next five years. Chart: CMD Group
Related Stories
Market Data | Jan 16, 2019
AIA 2019 Consensus Forecast: Nonresidential construction spending to rise 4.4%
The education, public safety, and office sectors will lead the growth areas this year, but AIA's Kermit Baker offers a cautious outlook for 2020.
Market Data | Dec 19, 2018
Brokers look forward to a commercial real estate market that mirrors 2018’s solid results
Respondents to a recent Transwestern poll expect flat to modest growth for rents and investment in offices, MOBs, and industrial buildings.
Market Data | Dec 19, 2018
When it comes to economic clout, New York will far outpace other U.S. metros for decades to come
But San Jose, Calif., is expected to have the best annual growth rate through 2035, according to Oxford Economics’ latest Global Cities report.
Market Data | Dec 19, 2018
Run of positive billings continues at architecture firms
November marked the fourteenth consecutive month of increasing demand for architectural firm services.
Market Data | Dec 5, 2018
ABC predicts construction sector will remain strong in 2019
Job growth, high backlog and healthy infrastructure investment all spell good news for the industry.
Market Data | Dec 4, 2018
Nonresidential spending rises modestly in October
Thirteen out of 16 subsectors are associated with year-over-year increases.
Market Data | Nov 20, 2018
Construction employment rises from October 2017 to October 2018 in 44 states and D.C.
Texas has biggest annual job increase while New Jersey continues losses; Iowa, Florida and California have largest one-month gains as Mississippi and Louisiana trail.
Market Data | Nov 15, 2018
Architecture firm billings continue to slow, but remain positive in October
Southern region reports decline in billings for the first time since June 2012.
Market Data | Nov 14, 2018
A new Joint Center report finds aging Americans less prepared to afford housing
The study foresees a significant segment of seniors struggling to buy or rent on their own or with other people.
Market Data | Nov 12, 2018
Leading hotel markets in the U.S. construction pipeline
Projects already under construction and those scheduled to start construction in the next 12 months, combined, have a total of 3,782 projects/213,798 rooms and are at cyclical highs.
