Commercial construction spending in the second quarter of 2017 increased 13% from the same period last year and office construction rose 11%, according to the latest Marcum Commercial Construction Index. However, these bright spots contrast with a decline of 3.1% in overall nonresidential construction spending in June year-over-year and a monthly drop of 2.0% from May 2017. The index is produced by the Construction Services Group of Marcum LLP, a national accounting and advisory firm.
Anirban Basu, the report’s author, attributes the relative strength of the commercial and office subsectors to the ecommerce boom. He also notes that June spending in communication construction increased 4.9% year-over-year and 2.8% from May 2017. The only other subsector to record a gain was health care, with a 2.8% annualized improvement, although monthly results in the sector declined 0.2% in June.
“With interest rates remaining near rock-bottom levels, investors have been chased up the risk spectrum, including into commercial real estate. That has helped to raise property values and prompt new construction. These dynamics have also helped lift industry backlog and supported reasonably solid profit margins,” Mr. Basu wrote.
Spending in all 12 of the remaining nonresidential construction subsectors retreated on both an annualized and monthly basis. The largest declines came in public sector spending, including conservation and development (-20.6% and -7.3%, respectively), sewage and waste disposal (-16.8% and -2.4%), and water supply (-16.4% and -3.7%).
“The infrastructure boom we have been waiting for has not arrived as of yet. Business attitudes and the business environment and confidence remain high for the moment. Backlogs in the private sector are healthy. Investment is robust. It’s my hope that we can turn some of this momentum towards infrastructure, sooner rather than later,” said Joseph Natarelli, national leader of Marcum’s Construction Services Group and an office managing partner in New Haven, Connecticut.
Current economic trends in the construction industry will be discussed in depth at the upcoming annual Marcum Construction Summits in Ft. Lauderdale, Fla., on September 7; New Haven, Conn., on September 27; and New York City on October 23.
For the complete Marcum Commercial Construction Index, visit www.marcumllp.com.