Following the recession, there has been a steady build-up of construction activity—however looking at things through a realistic lens, when/is there an end in sight? Businesses and consumers have faith in what the future holds, but I was interested in exploring what the experts had to say. Turns out 2015 was the perfect example of peak growth in construction activity with office space under construction spiking up to 92.8 million square feet (Westgren 2). History has proven no growth can last forever, but how do the pros project 2016’s construction activity?
Dana Westgren of Jones Lang LaSalle has an interesting perspective that considering this rapid growth in 2015, 2016 is likely to be another growth year, however will unfold differently. While growth will be sustained, it’s probable that investors will think more cautiously about how and when to build, expand, and renovate based on Chinese economic disparities likely expanding into the US economy and soon affecting our construction market. Basically, any decrease in Chinese consumer spending will adversely affect US exports, and if we don’t change up our dependence/shift to alliances with other stronger markets, the US can anticipate a decrease in US GDP. Yes, certainly easier said than done—however there will be an inevitable fear of rising costs from this, and hesitance to jump into construction activity unlike 2015.
Electrical Contractor magazine projects a similar outlook. Financial recovery is still a main discussion after the recession, and although growth is forecasted to continue, that growth comes with its fair share of obstacles. According to their “2016 Construction Outlook” piece, “Economists coined the term ‘half-fast’ to describe the financial recovery. It’s an economy in flight, but it isn’t quite soaring…For example, 2015 construction starts were forecast for 9 percent growth. They landed at 13—a tailwind. This year’s construction market advance is estimated at 6 percent—a definite headwind. However, it may still catch a tailwind. Construction in 2016 should be a year of sustained progress, albeit with a few soft spots.”
JH Greene project manager, Tony Chase, shared the sentiment of the other thought leaders I researched. Looking back, he couldn’t recall a year that outpaced predictions as much as 2015. Even with some pretty drastic weather set-backs, there was a constant demand whether we were engaged with healthcare, restaurant, office, or retail projects—our pipeline was consistently full. As for 2016, this growth should continue, however he believes without the intensity of last year. Given the strong growth being seen, there are many pressures on finding qualified construction labor. Although this isn’t a concern of JH Greene’s, the industry as a whole is noting this issue as the construction workforce is nationally declining.
No matter how the mix of tailwind and headwinds evolve, the current construction market presents a healthy demand and competition across major US markets thus far in 2016. With education and manufacturing sectors leading the way, it will be interesting to see how the rest of the year shapes up.