Lodging, office buildings lead commercial building sector
Reed Construction Data’s U.S. chief economist Bernard Markstein answers one-on-one questions about the commercial building construction forecast.
Bernard Markstein, U.S. chief economist at Reed Construction Data, Norcross,
Ga., shares economic and construction insights with consulting engineers and business development directors.
CSE: With regard to the Reed Construction Data December Expansion Index, define the portions of the commercial building sector that will grow in the next 12 to 18 months.
Markstein: The Reed Construction Data Expansion Index is not broken down by categories. However, I do use the Reed starts data that are used to generate the Expansion Index, along with other data, to formulate a forecast of many of these areas. Based on this forecast for the next 12 to 18 months:
- Lodging will continue to be a strong area for both renovation and new construction, with more emphasis on the latter.
- Office construction will finally gain some traction; there will be more renovation to reduce energy costs, reduce water usage, improve air
quality, and to allow more high technology in buildings; new buildings will focus on the same issues.
- As residential construction expands, so will demand for retail construction—malls and strip malls; the big box store (except for places like Walmart and Costco) is largely dead, boutique stores and stores to meet daily needs (e.g., grocery stores) and personal services (e.g., hair care, restaurants) will be the order of the day.
- Construction of health care facilities will slowly ramp up, but begin to pick up speed in the second half of the year and into 2015; suburban satellite operations will tend to dominate.
- Virtually all the action for education construction will be for private facilities, largely for colleges and universities; little will occur on the public side for well over a year.
- Multifamily construction will continue to grow, but at a slower rate; large projects will have retail space built into them, and in some cases, office space as well.
CSE: Which portion of the nonresidential building market will see the largest jump in the next 12 to 18 months? What building types?
Markstein: Health care, followed by education, will finally come into their own and move to the front for new construction.
CSE: Do you expect the market for new hospital buildings to grow in the next 12 to 18 months? What about stand-alone medical clinics or specialty buildings? How has the Affordable Care Act affected this?