Nonresidential Construction Spending Expected to Increase in 2012

Via AIA Chief Economist, Kermit Baker, PhD, Hon. AIA

In 2011, a volatile Architecture Billings Index () reflected the unstable conditions U.S. practices were struggling to deal with. However, the year ended optimistically as the ABI remained at 52.0 for the month of December. So far, January has prolonged the hopeful outlook for the American design and construction industry, as many reports highlight a “modest recovery” in the nonresidential sector for 2012 and an even stronger upturn in 2013.

“Spending on hotels, industrial plants and commercial properties are going to set the pace for the construction industry over the next two years,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The institutional market won’t experience the same growth, but healthcare facilities and places of worship are poised for a positive economic outlook in that sector.”

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The AIA semi-annual Consensus Construction Forecast predicts a 2.1% rise in spending this year for nonresidential construction projects and a 6.4% increase in spending for 2013. Bloomberg’s recent article, “Construction Rises as Architects Show U.S. Nonresidential Bounce”, acknowledges the forecast and reports multiple examples that confirms a consistent overall consensus among many economic professionals.

Bloomberg highlights that the commercial and industrial component climbed to its highest in ten months during the month of December at 54.1, while U.S. office vacancies fell to its lowest since 2009 at 17.3 percent. Bloomberg also commented on the growing activity in stocks of companies that design privately-funded projects in manufacturing and utility industries, such as Caterpillar Inc. (CAT). Further stating that Caterpillar has reported the “demand for construction equipment is improving.”

However, Baker warns, “We are concerned that the unusually high energy costs, given the overall weakness in the , might trigger a jolt in inflation and hamstring economic recovery. The housing market also needs prices to stabilize and to resolve the high number of delinquencies and foreclosures before it can fully recover.”

View the AIA press release here and Bloomberg’s complete article here.

Reference: AIA, Bloomberg

Cite: Rosenfield, Karissa. "Nonresidential Construction Spending Expected to Increase in 2012" 31 Jan 2012. ArchDaily. Accessed 26 Nov 2014. <http://www.archdaily.com/?p=204198>