Volume 47, Issue 9 - September 2012

IndustryOutlook

Nonresidential Construction Spending Expected to Increase Through 2012

Nonresidential construction projects are expected to increase 4.4 percent for the remainder of 2012, according to the American Institute of Architects (AIA) semi-annual Consensus Construction Forecast, released last month.

The group reports that it has seen a sharp spike in demand for industrial facilities so far this year, along with sustained demand for hotel and retail projects. AIA previously had projected a 2.1 percent increase in nonresidential construction for the year in its January Consensus Forecast.

Additionally, AIA projects a 6.2 percent in construction spending for 2013.

“With companies looking to bring back manufacturing jobs from overseas, there has been a sharp rise in demand for industrial facilities, which is leading to an upward revision in projections for future construction spending,” says AIA chief economist Kermit Baker. “Continued budget shortfalls at the state and local level, along with a depressed municipal bond market are holding the institutional market back from seeing similar upticks in spending.”

Baker enumerated several possible risks that could impact his positive projections. “Federal tax and spending changes-the so-called fiscal cliff—that may come into play in early 2013 could upset the economic applecart and prove detrimental to recovery possibilities,” he says. “We will likely have a better sense after the presidential election what will happen with regards to the Bush-era tax cuts, Social Security payroll tax, extended unemployment, and deficit reduction plans that will have a ripple effect that will extend to the construction industry.”


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