Total engineering and construction spending for the U.S. is forecast to end up 1 percent in 2019, compared to up 4 percent in 2018.
Spending growth in 2019 is expected to be led by public investment across both nonresidential buildings and nonresidential structures. Current top-performing segments forecast in 2019 include conservation and development (+9 percent), transportation (+8 percent), water supply (+8 percent), public safety (+7 percent), office (+6 percent), and highway and street (+6 percent). Forecast bottomperforming segments in 2019 include religious (-6 percent), single-family residential (-5 percent) and residential improvements (-4 percent).
Only one segment, sewage and waste disposal, was upgraded into our growth category through the second half of 2019. Conversely, educational and manufacturing have both been downgraded from growth to stable. Last, both single family residential and residential improvements have now been downgraded from stable to down. All three residential segments are now expected to end this year lower than 2018 spending levels.
Total Construction Put in Place Estimated for the United States
Source: U.S. Census and FMI Forecast
Total Construction Spending Put in Place 2018 and Forecast Growth (2018-2023 CAGR) by Metropolitan Statistical Area
Source: FMI Forecast
Residential Construction Put in Place
Rising home prices, debt levels and slow wage growth have resulted in significant affordability concerns
Homebuyers are weary of the current economic climate, with mortgage rates expected to continue a slow decline
Employment growth has slowed, but remains positive
Nonresidential Construction Index (NRCI) Scores Q1 2011 to Q3 2019 (Scores above 50 indicate expansion; scores below 50 indicate contraction)
NRCI scores are based on a diffusion index where scores above 50 represent improving or expanding industry conditions, a score of 50 represents conditions remaining the same, and a score below 50 represents worse conditions than last quarter (or contraction).
The data in the NRCI is presented as a sampling of construction industry executives voluntarily serving as panelists for this FMI survey. Responses are based on their experience and opinions, and the analysis is based on FMI’s interpretation of the aggregated results.
Nonresidential Buildings Construction Put in Place
Business travel, occupancy rates and RevPar expected to remain healthy through 2020
Recent capacity additions, alongside slower employment growth, will continue to stall investment growth
Transportation infrastructure projects support elevated spending in select markets
Competition from nontraditional forms of lodging (e.g., Airbnb)
Drivers: Occupancy rate, RevPAR, average daily rate, room starts
Shift from major corporate campus projects to public office spending is driving the overall trend
Widespread labor constraints and slowed employment growth are expected to weigh on future spending
Demand for data center investment continues to expand rapidly
Drivers: Office vacancy rate, unemployment rate
Traditional retail continues to evolve with high, albeit plateaued, vacancy rates and ongoing closures/exits
Continuing rise in e-commerce led by Amazon, eBay and others
Renovations assist in upholding annual spending levels
Demand for warehouse and distribution continues to expand with a shift to last-mile logistics
Jay Bowman is a principal with FMI. Jay assists a broad range of stakeholders in the construction industry, from program managers and general contractors to specialty trades and materials producers, with the identification and assessment of the risks influencing the strategic and tactical decisions they face. In this role, Jay’s primary responsibilities include research design and interpretation, based on developing an understanding of the context within which these organizations operate. Jay can be reached at firstname.lastname@example.org.
Brian Strawberry is a senior economist with FMI. Brian’s expertise is in economic and statistical modeling. He leads FMI’s efforts in market sizing, forecasting, and building product/construction material pricing and consumption trends. The combination of Brian’s analytical skills and creative problem-solving abilities has proven valuable for many contractors, owners and private equity groups as well as industry associations and internal research initiatives. Brian can be reached at email@example.com.