Construction Spending on Cusp of Record
Gilbane Forecasts in Economics Report
It's possible overall construction industry spending could reach an all-time high in 2016 for any three-year period on record, so says Gilbane Building Company in its Construction Economics Report.
At the same time, spending in nonresidential projects alone could equal another three-year record set eight years earlier.
Total construction spending, which covers the categories of residential, nonresidential and non-building infrastructure, is forecast to grow 10.7 percent in 2015 to a level of $1.1 trillion, and another 9.7 percent in 2016, according to Gilbane's report, released in January.
Spending could grow as much as 30 percent from 2014-2016. If it does, it would set a new three-year record. There were only two time frames in the last 20 years that construction spending has been anywhere close: 29 percent growth from 2003-2005, and 27 percent from 2013-2015.
Nonresidential activity is clearly leading this charge.
Gilban said nonresidential activity is predicted to grow 13.7 percent in 2016, and if this happens, the expansion rate would reach 40 percent for the three-year period of 2014-2016. There have been only two comparable time frames in the last 20 years: 40 percent from 2006-2008, and 32 percent from 1995-1997.
Nonresidential spending year-to-date (YTD) through November has increased 17.6 percent, up $53 billion over the same time frame in 2014. Meanwhile, residential spending (YTD) has climbed 13 percent, up $45 billion, while non-building projects (YTD) decreased 0.2 percent, down less than $1 billion.
Residential spending in 2016 is projected to expand 11.8 percent over 2015. Other industry projections for residential spending in 2016 range from 5-10 percent growth over 2015, with the average forecast at 7.5 percent.
Residential starts are at a nine-year high, Gilbane Building Company said. Starts averaged 20 percent per year growth for the last four years, with 2014 held to only 10 percent. Increases in 2015 and 2016 should be 15 percent and 16 percent, respectively. This new starts activity should keep spending hikes at 12-15 percent a year.