Health care, offices and lodging to see more construction in 2013
The elections for president and both houses of Congress cleared away one dark cloud hanging over the construction industry. Business leaders frequently cited uncertainty about the direction of the country as their No. 1 complaint and reason for inaction, according to an industry forecast issued by consultant FMI just before Election Day.
Regardless of who won, removing uncertainty would boost the economy, according to FMI’s 2013 U.S. Markets Construction Overview. The report forecasts activity in different nonresidential building sectors. Health care probably would have felt the most impact from a change in the White House or Congress. So, it’s a good place to start to look at what FMI predicts for next year.
Health care: FMI expects this sector to end 2012 with a 3% increase, which will strengthen to double-digit growth by 2015 when it will reach record highs of $52.6 billion. FMI made this prediction with the idea that Republicans could control both houses of Congress and possibly dismantle Obamacare.
As it stands, FMI sees the growth in health care driven by the needs of aging baby boomers and renovations of existing facilities. Other trends to watch are an increasing use of prefabrication, building information modeling and integrated project delivery.
Manufacturing: This year will see 3% growth in this sector with steady increases through 2016. The automotive industry is leading the way along with utilities, especially those for natural gas. Manufacturing capacity now tops 79%, which is near normal; uneven growth will make companies cautious about adding capacity and employees.
Education: FMI forecasts 2% growth in 2013 following a 1% increase in educational construction this year. State tax revenues are rising again, but money is still tight.
Green construction, and renovating existing schools for energy and water conservation, will remain a strong trend in 2013. Many universities say they will build only LEED-certified facilities. Modular school construction – not to be confused with temporary classrooms in trailers – is another trend.
Office buildings: This sector should grow 6% in 2013 through 2014 after an expected 4% increase this year. Boston, Chicago, New York and other big cities will see more activity but overall growth will be slow.
Holding back new office construction will be status-quo vacancy rates, unsteady employment increases and the rise of home offices. Spurring activity will be renovations to make offices more green, and tenants who trade up to greener and better appointed offices.
Retail: Commercial/retail construction is expected to increase 8% next year to $49 billion. This will follow 5% growth this year.
The higher activity is occurring despite several big-box retail chains closing money-losing stores and the rise of online shopping. Lower energy prices, however, should raise discretionary spending by consumers.
Lodging: FMI forecasts construction to grow 7% next year and 8% in 2014 after rising 4% this year. The weak U.S. dollar is helping to attract international travelers while lower gasoline prices may boost domestic vacation plans. Hotel owners are renovating more than they are building new properties, and the retrofits increasingly are green.
Public safety: Construction of another form of lodging – namely prisons – will increase 6% next year. Overcrowding in prisons and jails will result in new and renovated facilities.
With the election behind us, building owners can invest in their properties with greater certainty. The growth in nonresidential construction sectors should result in a better year for plumbing and mechanical engineers.