JLL: 24% surge in retail sector driving Q1 construction gains

Dive Brief:

Real estate company JLL reported that retail construction activity in the first quarter of 2016 is 24.4% higher than the first quarter of 2015 — a performance strong enough to help boost nonresidential construction employment 4.7% during the same period, Building Design + Construction reported.
JLL predicted continued commercial construction growth into the second quarter — including in the industrial and office sectors — but said that concerns over the economic downturn in China, coupled with a near 1% decrease in the quarter-over-quarter U.S. gross domestic product, were hampering investment, as evidenced by a downward tick in office construction starts.
Retailers' desire to provide a seamless customer experience, landing somewhere between the Internet and brick and mortar, has driven retail renovations, which outperformed new retail construction in the first quarter.

Dive Insight:

Todd Burns, president of project and development services for JLL Americas, told BD+C that caution is the word of the day when it comes to nonresidential, but developers and tenants/owners still continue to build or renovate.

Key takeaways from the report include:

Retailers and e-commerce firms are also driving industrial construction, which grew 12.9% year over year, as their need for new and modern facilities increases.
Office construction was up 20.2% year over year, but starts decreased 33%.
A "low-cost, well-educated" workforce is drawing employers to Nashville, which has seen construction increases in all areas of nonresidential.
San Francisco is on the verge of passing New York City as the most expensive construction market.
Dallas blew every other market away with 80% retail development growth from the first quarter of 2015.

In the latest Commerce Department report, construction spending dipped 1.8% in April, and the nonresidential sector was no exception, slipping 1.5%. However, construction spending was up 4.5% from April 2015, and spending from January 2016-April 2016 increased 8.7% from the same period in 2015. Although nonresidential and public construction spending slipped, the latest Dodge Momentum Index was up slightly by 0.6% in April, which could indicate a coming bump in new construction activity.

However, in another Dodge report, the company said that the value of all construction starts fell 8% between March and April and 12% year over year for the period January 2016-April 2016. While the institutional segment of nonresidential performed well, Dodge Data & Analytics Chief Economist Robert Murray said the commercial segment could suffer in the future because of more stringent lending standards.