flexiblefullpage -
billboard - default
interstitial1 - interstitial
catfish1 - bottom
Currently Reading

Construction activity will slow next year: JLL

Market Data

Construction activity will slow next year: JLL

Risk, labor, and technology are impacting what gets built.

By John Caulfield, Senior Editor | November 22, 2016

The rate at which the industry is adding construction workers isn't keeping pace with its demand, according to JLL's latest industry outlook. Image: JLL Q3 2016 Construction Outlook

This month, the national average hourly construction wage was expected to top $30 for the first time in the country’s history. And in its Q3 2016 Construction Outlook, JLL forecasts another 3% increase by next March.

That prediction comes at a time when the number of construction workers at the end of the third quarter of 2016—1.46 million—was up 2.8% compared to the same period a year earlier. “The size of the labor pool is rebounding from the downturn, but at a much slower rate than demand,” JLL reports. Consequently, poaching labor from competing contractors and bid jumping have increased in several markets.

Labor-intensive industries, such as drywall and roofing, can expect to experience continued cost growth as a result of manpower shortages.

What’s happening on the labor scene is one of three factors that JLL identifies as having the greatest impact on U.S. construction currently.

In the third quarter, $317 billion was spent on construction, up 1% from the same quarter in 2015. The national construction backlog was 8.5 months, flat from a year ago. And while the pipeline in many sectors remains strong across property types, JLL cautions that demand is “normalizing” in many markets. “We can expect to see a national slowdown in the construction industry by end-of-year 2017 and with it, a shift in how clients are using construction services.”

Increases in labor and materials are driving construction costs, especially in coastal metros where activity is particularly robust. Image: JLL Q3 2016 Construction Outlook.


Already, banks have become more selective in their lending practices, financing standards continue to tighten, and securing loans for construction is tougher. JLL also expects uncertainty over the next several months pending policy decisions of the new president, Donald Trump, who has stated publicly that investment in infrastructure will be a key focus.

JLL, though, isn’t so sure:

“By end-of-year 2017, expect to see a softer construction industry across the U.S., as demand and market saturations begin to level out across property types. A significant decline isn’t expected, but the rate of growth in the industry will slow, spurring greater competition between firms seeking work.”

Material costs rose 2.2% in the quarter, compared to 2015, as lumber consumption in the U.S. rose 10%. JLL doesn't expect the lumber trend to reverse until 2018 and 2019. Whereas, steel prices, which remain low, will continue to decline through the year few years, while cement prices, which have been declining slightly this year, will level off in 2017. 

The Construction Outlook finds that early adopters of technology are better positioned competitively for what could be coming next. Technology that includes BIM, drones, and 3D scanners “is having a profound impact on how project managers, contractors and service firms do their jobs through software, hardware, and the sharing economy.”


The Midwest region maintains an upward trajectory,but trails the West by two months. Southern construction markets are steadily growing and will continue to grow over the next three quarters. Image: JLL Q3 2016 Construction Outlook


The Outlook examined building activity in a number of sectors:

•At the end of the third quarter, 105.4 million sf of office space was under construction, up from 100.6 million sf in the same quarter a year ago. However, starts and completions were down.

•The pipeline for industrial construction rose 5.8% to 204.3 million sf, and quarterly absorptions jumped 32.3% over the second quarter.

•Acquisitions continue to drive growth in the hospitality sector, as transaction volume in the third quarter, $10.5 billion, was nearly double Q2 2016. However, while lodging occupancy still hovers at historic highs, it was down slightly in the third quarter, to 66.9%.

•82.4 million sf of retail space was under construction in the third quarter, more than 45% of which in the Southeast. But the retail sector remains volatile, after several recent announcements of store closings by high-profile chains like Office Depot/Office Max, which shuttered 400 outlets).

Related Stories

MFPRO+ Research | Feb 27, 2024

Most competitive rental markets of early 2024

The U.S. rental market in early 2024 is moderately competitive, with apartments taking an average of 41 days to find tenants, according to the latest RentCafe Market Competitivity Report.

Construction Costs | Feb 22, 2024

K-12 school construction costs for 2024

Data from Gordian breaks down the average cost per square foot for four different types of K-12 school buildings (elementary schools, junior high schools, high schools, and vocational schools) across 10 U.S. cities.

Student Housing | Feb 21, 2024

Student housing preleasing continues to grow at record pace

Student housing preleasing continues to be robust even as rent growth has decelerated, according to the latest Yardi Matrix National Student Housing Report.

Architects | Feb 21, 2024

Architecture Billings Index remains in 'declining billings' state in January 2024

Architecture firm billings remained soft entering into 2024, with an AIA/Deltek Architecture Billings Index (ABI) score of 46.2 in January. Any score below 50.0 indicates decreasing business conditions.

Multifamily Housing | Feb 14, 2024

Multifamily rent remains flat at $1,710 in January

The multifamily market was stable at the start of 2024, despite the pressure of a supply boom in some markets, according to the latest Yardi Matrix National Multifamily Report.

Student Housing | Feb 13, 2024

Student housing market expected to improve in 2024

The past year has brought tough times for student housing investment sales due to unfavorable debt markets. However, 2024 offers a brighter outlook if debt conditions improve as predicted.

Contractors | Feb 13, 2024

The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of January 2024

Associated Builders and Contractors reported today that its Construction Backlog Indicator declined to 8.4 months in January, according to an ABC member survey conducted from Jan. 22 to Feb. 4. The reading is down 0.6 months from January 2023.

Industry Research | Feb 8, 2024

New multifamily development in 2023 exceeded expectations

Despite a problematic financing environment, 2023 multifamily construction starts held up “remarkably well” according to the latest Yardi Matrix report.

Market Data | Feb 7, 2024

New download: BD+C's February 2024 Market Intelligence Report

Building Design+Construction's monthly Market Intelligence Report offers a snapshot of the health of the U.S. building construction industry, including the commercial, multifamily, institutional, and industrial building sectors. This report tracks the latest metrics related to construction spending, demand for design services, contractor backlogs, and material price trends.

Industry Research | Jan 31, 2024

ASID identifies 11 design trends coming in 2024

The Trends Outlook Report by the American Society of Interior Designers (ASID) is the first of a three-part outlook series on interior design. This design trends report demonstrates the importance of connection and authenticity.

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