Commercial Construction Spending Headed to Record High
Spending on hotel, office, distribution, and other commercial and public buildings likely will expand for an unprecedented ninth-consecutive year in 2019, according to a consensus forecast by the country’s top industry economists.
The panel of experts from construction industry analytics company Dodge Data & Analytics, trade organization Associated Builders & Contractors, and others recently surveyed by the professional organization American Institute of Architects raised its prediction for nonresidential construction spending in 2018 in the national and Philadelphia commercial real estate market to increase 4.7 percent, up from the 4 percent increase it forecast in January.
The panel also slightly raised its spending forecast for 2019 to 4 percent at midyear from 3.9 percent in January.
This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
“If these projections materialize, by the end of next year, the industry will have seen nine years of consecutive growth,” said American Institute of Architects Chief Economist Kermit Baker. “Much of the optimism in the outlook is coming from the over-performing commercial sector.”
The panel’s consensus is that spending on commercial buildings in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – will increase 6.7 percent this year, up sharply from 4.4 percent projected at the beginning of the year, and 3.4 percent in 2019, up from 2.9 percent in the January forecast.
Total spending by the end of next year in the national and Philadelphia commercial real estate properties market on nonresidential buildings, which includes public safety, health care, education, and religious facilities, is expected to be 5 percent greater than the last market peak in 2008, Baker said.
The bullish forecast is significant because, as recently as a year ago, the same economists warned a construction industry downturn could be on the horizon for U.S. and Philadelphia commercial real estate listings due to a shortage of construction workers, rising interest rates and construction costs, and concerns the economy was slowing. U.S. nonresidential spending increased just 2.2 percent last year, barely outpacing rising inflation in building costs.
One key sign that construction won’t be slowing any time soon is architect workloads in the U.S. commercial real estate market, including Philly office space, Philly retail space and Philly industrial space; these continue to increase. Architecture firms saw healthy growth in billings and new project activity last year, and both indicators remain strong through the first half of 2018.
Billings by design firms are an indicator of hard construction spending a year to 18 months in the future. Architects designing all types of buildings and housing types among current national and Philadelphia commercial real estate listings are reporting average project backlogs of more than six months, the longest since 2010.
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