By KERMIT BAKER, FAIA, Chief Economist, American Institute of Architects
Washington DC, January 11, 2024 -- After increasing by more than 20% last year, spending on nonresidential buildings will see a much more modest 4% increase in 2024, at a pace that will slow to just over 1% growth in 2025. Spending on commercial facilities will be flat this year and next, manufacturing construction will increase almost 10% this year before stabilizing in 2025, and institutional construction will see mid-single-digit gains this year and next.
These are the key conclusions from the AIA Consensus Construction Forecast panelists, a group comprised of the leading construction forecasters from across the country. This survey provides the most recent update of nonresidential building forecasts for 2024 and provides the first look at 2025.
- The AIA Consensus Forecast combines the work of Dodge Construction Network; S&P Global Market Intelligence; Moody's Analytics; FMI Corp.; ConstructConnect; Associated Builders & Contractors; Wells Fargo Securities; Markstein Advisors; and Piedmont Crescent Capital. To view individual forecasts, click here.
This past year produced a surprisingly strong performance for the building sector of the economy. The healthy spending rebound of almost 12% in 2022 came on the heels of only modest growth in 2020 and a decline of almost 5% in 2021, before spending accelerated to an estimated 22% in 2023. Manufacturing construction accounted for a large share of these gains as this sector alone produced almost 30% of overall spending on nonresidential buildings last year.
However, manufacturing was not the only bright light. On the commercial side, spending on offices was up an estimated 8%, retail and other commercial facilities 7%, and hotels 21%. The institutional sector did equally well, with healthcare and education spending both up an estimated 13%. Religious and public safety facilities each increased at a double-digit pace, and the amusement and recreation category grew to over 8%.
Recently-enacted federal programs provided some of the latest boosts to construction spending on buildings. The CHIPS and Science Act, enacted in August 2022, has boosted manufacturing spending by providing funding to high-tech hubs and semiconductor manufacturing. The Inflation Adjustment Act, also enacted in August 2022, has provided funding for the electrification of homes as well as financial incentives for energy-efficient commercial reconstruction and building.
Finally, the Infrastructure Investment and Jobs Act, enacted in November 2021, provides funding for traditional infrastructure, which eventually will encourage more building construction in conjunction with these infrastructure investments.
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