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These predictions from the AIA’s Consensus Construction Forecast Panel, comprised of some of the nation’s leading construction forecasters, are consistent with information derived from the AIA’s Architecture Billings Index (ABI). While national ABI numbers were mixed in 2011 — suggesting an uneven performance for construction in 2012 — they were more uniformly positive in 2012. Eight of the 12 months of 2012 showed positive national ABI readings, including the final five months of the year. The ABI readings in the fourth quarter of 2012 were the strongest quarter since the downturn began in early 2008, suggesting that construction activity should begin to accelerate significantly in the first half of 2013.
This year, architecture firms are expecting gross revenue to increase by about 3 percent on average. Almost half (45 percent) of firms are expecting revenue growth, 20 percent are projecting revenue declines, and 35 percent expect that revenue will be similar to 2012 levels. By specialization, residential firms are the most optimistic, expecting average revenue growth of 3.5 percent.
The AIA Consensus Construction Forecast panelists are a bit more optimistic than architecture firms in terms of projected revenue growth. They expect the $300 billion in spending for nonresidential structures to increase 5 percent, to about $315 billion in 2013. By 2014, they expect this level to increase another 7.2 percent, or $340 billion. While this is a reasonably healthy growth rate, that level of construction activity is still below the $377 billion average in nonresidential construction spending seen over the past decade.
Commercial facilities are expected to see the strongest growth this year and next. Growth is projected at just below 9 percent in 2013 and an additional 11 percent in 2014. That would bring commercial construction levels to almost $115 billion by the end of next year, which is still more than 10 percent below the average of the past decade. Hotel construction is expected to see strong growth this year and next, and both office and retail construction are projected to see growth averaging almost 10 percent per year.
Industrial construction should see reasonably healthy growth over the next two years, but nowhere near the almost 20 percent increase realized in 2012. Many companies are seeing the benefits of having manufacturing production facilities closer to home, particularly for products that have longer production lead times with offshore manufacturing. Construction increases are expected to be in the mid-single-digit range for the next two years, bringing industrial construction activity up to almost $56 billion by the end of next year.
Institutional construction spending growth tends to lag behind commercial and industrial activity both on the downside and upside. Spending increased very modestly in this category in 2012, and is projected to continue to see modest gains in 2013. By 2014, the pace of construction is expected to accelerate a bit more, growing by almost 5 percent that year. The strongest institutional sector for projected growth over the next two years is health care. Education, which traditionally accounts for about 40 percent of the institutional category, is expected to grow at about the same pace as the overall institutional category.
Publication date: 2/18/2013