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2016 Commercial building predictions: What are the trends worth noting as the New Year begins?


2015 began with adverse weather conditions, which stilted both design and construction. As the year continued, production rapidly increased. The AIA reported that greatest amount of activity was seen in the building of commercial properties – most notably offices and hotels. But after an extremely productive 2015, what can we expect as we move further into 2016?

According to AIA’s chief economist, Kermit Baker, spending on nonresidential buildings is to reach roughly $380 billion – an 8.2 percent increase from assumed 2015 totals. The predicted growth is more significant than previous forecasts, and comes at the end of what the AIA notes as a year where the “overall construction market has performed extremely well.”

Chief economist for Dodge Data & Analytics, Robert Murray, noted that total 2015 construction activity was on pace to reach the largest gain since the economic recession during what he refers to as, “an evolving construction expansion.” Dodge Data and Analytics predicts the U.S. economy will support continued growth in the construction sector – 2016 will be a year of slow but steady expansion for the industry.

Construction sector 2016 trends, according to Dodge Data and Analytics:

  • Single-family housing will rise 20 percent in dollars, corresponding to a 17 percent increase in units to 805,000 (Dodge basis). Access to home mortgage loans is improving, and some of the caution exercised by potential homebuyers will ease with continued employment growth.
  • Multifamily housing will increase 7 percent in dollars and 5 percent in units to 480,000 (Dodge basis), slower than the gains in 2015 but still on an upward trajectory. Low vacancies, rising rents, and the Millennials’ demand for apartments will encourage more development.
  • Commercial building will increase 11 percent, up from the 4 percent gain estimated for 2015. Office construction will resume its leading role in the commercial building upturn, aided by more private development as well as construction activity related to technology and finance firms.
  • Institutional building will advance 9 percent, picking up the pace after a 6 percent rise trending for 2015. The educational facilities category is seeing an increasing amount of K-12 school construction, supported by recent bond measures.
  • Manufacturing plant construction will recede an additional 1 percent in dollar terms, following the steep 28 percent plunge for 2015 that reflected pullback of large petrochemical plant starts.
  • Public works will be flat with its 2015 amount, as a modest reduction for highways and bridges is balanced by some improvement for environmental categories. The benefits of an impending multiyear federal transportation bill will show up at the construction site later in 2016 and into 2017.
  • Electric utilities and gas plants will fall 43 percent after a sharp 159 percent jump in 2015. The lift coming from new starts for liquefied natural gas export terminals will be substantially less, and new power plant starts will recede moderately.