Consensus Forecast: Nonresidential construction spending to rise 8% in 2016

Dive Brief:

The American Institute of Architects' semi-annual Consensus Construction Forecast predicted that nonresidential spending will increase approximately 8.3% in 2016 and 6.7% in 2017.
The report noted that 2015 nonresidential construction spending exceeded expectations and predicted this year should also see significant demand for hotels, office space, manufacturing facilities and amusement and recreation spaces.
The AIA Consensus Construction Forecast Panel projects construction business conditions for the next 12 to 18 months. The panel includes forecasts from Dodge Data & Analytics, Wells Fargo Securities, IHS-Global Insight, Moody’s economy.com, CMD Group, Associated Builders & Contractors, and FMI.

Dive Insight:

"While rising interest rates could pose a challenge to the U.S. economy, lower energy prices, improved employment figures and an enacted federal budget for 2016 are all factoring into a very favorable outlook for the construction industry," AIA Chief Economist Kermit Baker said in a statement.

He added that the institutional construction segment "if finally on very solid footing" after several disappointing years.

Gilbane Building’s Winter 2015-2016 Market Conditions in Construction report this week found the 2015 surge in spending was driven by nonresidential construction, with growth at 10.7%, to $1.1 trillion, for 2015. Gilbane predicted spending will rise 9.7% in 2016 and that total construction spending growth from 2014 to 2016 may reach 30% — a new record.

Of course, no discussion of increased construction spending is complete without a mention of the ongoing concern over adequate supplies of skilled labor. Gilbane said the lack of skilled workers has driven up home prices and could lead to higher wage rates.