Nonresidential Building Spending to Decline Through 2021

As a result of the partial economic shutdown, businesses and organizations will continue to be hesitant to invest in modernized or new facilities, according to a mid-year update to the American Institute of Architects’ (AIA) Consensus Construction Forecast. The trend ends an almost decade-long expansion in construction spending.

The AIA Consensus Construction Forecast Panel—consisting of leading economic forecasters—projects spending on nonresidential facilities will decline just over 8% this year, and another 5% in 2021. The commercial building sector is expected to be the hardest hit, with spending projected to decline almost 12% this year and another 8% in 2021. The industrial sector is slated to see declines of 5% this year and 3% next year. While institutional buildings will fare the best on the nonresidential side, spending on these facilities is projected to drop almost 5% this year, and another 2% next.

“As much of the economy was shut down in mid-March to help limit the spread of the pandemic, there was hope that after the initial steep decline in economic activity there could be an almost equally quick recovery,” says AIA chief economist Kermit Baker. “However, since mid-June economic growth has stalled. The timing coincides with a spike in new COVID-19 cases across the country, and the resulting pause or roll-back of reopening plans in many states.”

Market Segment Consensus Growth Forecasts 2020 2021
Overall nonresidential building -8.1% -4.8%
Commercial total -11.6% -8.4%
Retail & other commercial -7.7% -7.2%
Office space -11.1% -7.6%
Hotel -20.5% -16.5%
Industrial total -8.3% -3.3%
Institutional total -4.5% -1.7%
Public safety 15.6% 2.5%
Healthcare facilities 2.4% 3.2%
Education -6.6% -1.0%
Religious -9.9% -5.9%
Amusement / recreation -13.0% -11.9%

 

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