Nonresidential Building Activity Expected to Increase in 2015

WASHINGTON (July 28, 2014) — Due to the weather-related slow start in the nonresidential building market during the first part of the year and the prolonged weakness in the institutional sector, construction spending projections for the rest of the year have been lowered slightly. The commercial construction sector is still looking at solid spending increases throughout the remainder of 2014, paced by high levels of demand for hotels and office buildings. The American Institute of Architects’ (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, is projecting that spending will see a 4.9 percent increase in 2014, down from the previous estimate of 5.8 percent, with next year’s projection holding at 8 percent.

“The institutional market has been a drag on the overall recovery for the design and construction industry for the last few years, and until we see state and local governments ramp up spending for new education, health care and public safety structures, there likely won’t be a widespread acceleration in spending for the entire industry,” said AIA Chief Economist Kermit Baker, Ph.D, Hon. AIA. “But we continue to have an optimistic outlook for the commercial and industrial sectors both for the rest of this year and into 2015.”

Baker added, “While there does not appear to be any structural frailties in the overall economy that could possibly derail increasing levels of construction spending over the next 18 months, lending standards at financial institutions continue to fall well short of the increasing demand for commercial real estate loans, which is another factor that serves as a wild card and a source of concern for the entire industry.”

Click here to view a video of AIA’s chief economist discussing economic trends for the third quarter of 2014.