All Articles Finance 2015 Construction outlook appears good -- sort of

2015 Construction outlook appears good — sort of

4 min read



The economy has been slowing down, and isn’t growing as quickly as expected, said Alex Carrick, chief economist at CMD, formerly Reed Construction Data, during Thursday’s construction outlook webinar hosted by CMD. That statement was underscored when the stock market closed down, cutting the year’s gains to a measly 0.10%.

And the wobbly economy was a concern to the other top economists in the industry, Ken Simonson  of the Associated General Contractors of America and Kermit Baker of the American Institute of Architects.

The construction-building picture now, going forward

Total nonresidential construction last year was more than $606 billion, up 7.1% from a year earlier, according to the Census Bureau. Leading the charge were lodging, office, and manufacturing construction projects. Total residential construction last year was $354 billion, up about 3.5% from a year earlier, led in large part by growth in multifamily construction.

And this year is off to a reasonable start as well, the economists report, citing continuing strength in multifamily housing starts, as well as power and manufacturing projects. Lodging, too, has been a strength, but Baker sees this as late in the cycle, saying most of the “growth is behind us.”

However, all three see construction growth as “spotty” and “uneven,” and note there are challenges.


For instance, the number of civil engineering projects in 2104 was up more than 9% from a year earlier, according to Carrick, but he sees that increase declining to 4.2% this year and yet another declining increase to only between 2.2% and 3.3% over the next several years.

Then, there’s MAP-21, the bill that funds transportation infrastructure projects in the country, is due to expire at the end of this month,

Ken Simonson

and legislators still have no agreement about how to fund it. Because of that, Simonson sees a no growth this year or even a 5% decline in spending on highway and roadwork projects this year, and even a cancellation of contracts if the current bill lapses with nothing in its place.

He also forecasts a spending on health care facilities to remain steady or even decline 5%, although Carrick sees potential for a double-digit spending increase, saying “this [sector] has got to start taking off because as a society as a whole we’ve become health conscious and there’s the aging baby boomers.” Both note that it’s strange not to have seen this particular segment tick up yet as the population ages  and is starting to live longer.

The availability of construction workers is also an increasing concern. So many were let go during the Great Recession that the available workforce has shrunk. And, it’s getting older as fewer young people and immigrants enter the field. Baker says the industry “needs to attract more immigrants, younger workers, and make it more attractive to women if we want to see workforce numbers worthy of a growing industry.”

In addition, Simonson notes three trends that are holding back the need for building: “Government spends less on schools, infrastructure; consumers switch from stores to online buying; and employers shrink office space per employee.”

Bright spots

Kermit Baker

Remember, all three see the industry growing. Simonson and Carrick note the increase in construction activity at tidewater ports in preparation for the large Panamax ships expects once the Panama Canal expansion is complete. There’s more dredging, building of terminals and rail links, roadways and tunnels leading to the ports.

In addition, all three see the trend of the young and old migrating to cities so they can live near work and play and learn as something that isn’t going away soon. This means continued construction of mixed-use projects be they residential towers with retail and restaurants on the ground floor or even more mixed uses.