Timing a Construction Recovery

 

Within the commercial category, retail construction is expected to fare the best, falling only 1 percent in comparison to high single digit declines in office and hotel construction. In the institutional category, healthcare construction spending is projected to see a modest gain this year, while education construction will fall.
Courtesy of Taylor Structures Inc.

In spite of significant improvement in the broader economy, an upturn in nonresidential construction spending is not yet imminent, according to Kermit Baker, AIA Chief Economist. AIA research indicates that a construction spending recovery has traditionally followed a design recovery by nine to 12 months. That would indicate that we’re unlikely to see an upturn in construction spending until at least the second half of this year.

Architecture firms are not expecting such an upturn to be strong. A December 2010 survey of architecture firms found that expected growth in billings for 2011 is quite low. Overall, firms are expecting revenue gains of just over 1 percent for the year, slightly higher for commercial/industrial and residential firms (3.1 and 2.4 percent, respectively), but lower for institutional firms (-0.6 percent).

The AIA Consensus Construction Forecast panel is also expecting rather modest gains in construction activity this cycle. They are projecting construction spending, when adjusted for inflation, to modestly decline 2 percent overall this year.

Declines in the commercial sector specifically will be somewhat larger (-4.2 percent), and industrial sector declines will be larger still (-11.8 percent). The institutional sector is forecasted to only decline by 0.2 percent.

– Courtesy of AIA