ການຄາດຄະເນການກໍ່ສ້າງທີ່ບໍ່ແມ່ນທີ່ຢູ່ອາໄສ: ຊ້າລົງ 2023-2024

Non-residential construction will shrink as the economy drops into recession sometime in the next year or so, due both to the higher interest rates by themselves and the reduced spending that will lead to. The decline won’t be devastating, but it will be significant.

The sector’s current position is puzzling today, with the number of dollars being spent growing moderately but costs up significantly. That usually means that actual activity is down after inflation adjustment. But positive signs conflict with that view. Employment for nonresidential construction is up, for both actual building activity as well as specialty trades. Other indicators look quite positive according to Ken Simonson, chief economist of the Associated General Contractors. Forecasting is more difficult, obviously, if we lack a good starting point.

The employment figures and positive industry anecdotes present more reliability than other data in this case. All things considered, it looks like real activity has increased by about four percent over the last 12 months.

The sectoral commentary below derives from on an economic forecast that anticipates recession starting in the second half of 2023 or possibly early 2024. A recession is not absolutely certain but highly likely. It will probably be of moderate severity. For comparison purposes, it will be milder than 2008-09 but worse than 2001.

The macroeconomic factors most at work on nonresidential construction will be the high and rising interest rates plus the decline in total spending that comes with a recession. But individual sectors will do better or worse than the aggregate based on their microeconomic conditions.

Commercial constitutes the largest category, with 21% of all nonresidential construction. It includes retail, restaurants and bars, as well as warehouses and wholesale facilities. This category has grown briskly since the summer of 2020. Warehouses have been particularly strong thanks to increased online sales. Retail, however, has not been as weak as it may seem. Large shopping malls are certainly not going up anymore, but grocery stores, restaurants and activity-based retail (gyms, spas, hands-on craft shops) have grown. Amazon is slowing its warehouse construction. ວາລະສານ Fortune ລາຍງານ, “MWPVL International Inc., which tracks Amazon’s real-estate footprint, estimates the company has either shuttered or killed plans to open 42 facilities totaling almost 25 million square feet of usable space.” However, warehouse vacancy rates across the country are quite low and announcements of new projects continue to be strong. Look for continued activity through 2023, with a slowdown late in that year due to general economic cooling.

Power plants are the next largest portion of private nonresidential construction. Spending has dropped 14% from a year ago. However, electric reliability is worsening in most of the country. Eventually we’ll increase spending, though higher interest rates prevent marginal projects from penciling out. Most likely, power construction will level off for two years then grow once again.

Manufacturing construction, in contrast, has grown substantially in the past year, up 22%. Three conflicting trends will drive activity in the coming years. First, the pandemic switch from spending on services to spending on goods is reversing, cutting the need for new manufacturing capacity. Second, the tight labor market is leading to additional purchases of automation and robotics equipment. This will sometimes require remodeling of existing facilities, and in rare cases brand new construction. Third, many companies in the United States would like to re-shore their own production and sourcing of materials and components. However, they are not willing to pay extremely higher costs for shorter supply chains, so this effect will be gradual over the coming years. On net, manufacturing construction will slow in 2023 and 2024.

The next largest category is office construction, which has held up surprisingly well. Some of the continued activity is large, multi-year projects that are being completed in a weaker market, but in some areas suburban offices are going up. That activity will likely shrink as the economy weakens in 2023 and 2024.

The smaller sectors of private nonresidential construction have been holding up a little better than the aggregate category. Healthcare continues to grow with the aging population. Communications is flat, with needed infrastructure mostly built out. Private education has increased with private school and daycare demand increasing. Lodging has staged a comeback from the pandemic decline and is likely to continue growing. Transportation has declined but probably needs to expand. Amusements and recreation has rebounded from the pandemic decline and will probably not decline due to pent up demand. Religious construction has been pretty level and will likely continue so. In all, these sectors should buoy to total private nonresidential activity.

Public sector construction, which is about two-thirds the size of private nonresidential construction, has begun creeping up after declining in the pandemic. The infrastructure bill will boost spending, but only some years from now, and even then gradually. The Buy America Act requires American-made construction materials and manufactured products, which will be hard to meet. Waivers are available for products not available from American producers, or available only at high cost, but securing waivers will add delays. In short, look for modest gain in public construction over the next two years, followed by stronger increases mid-decade.

Rolling this all together, nonresidential construction will suffer in late 2023 and into 2024, with recovery sometime in 2025. The downturn will not be severe but it will be noticeable for almost all parts of the industry. Businesses involved, either directly or indirectly, should sketch out contingency plans for significant sales declines.