Q1 2016 U.S. Construction Trends

Office Building Construction - Flickr

As we progress through 2016, there are some construction trends worth considering. According to financial and professional services firm JLL, global economic struggles will eventually affect business and construction demand in the U.S. However, the U.S. construction industry saw a strong start to 2016 despite global concerns.

  • Overall construction costs are rising as building costs, construction employment, wages and productivity all continue to grow.
  • The infrastructure construction backlog indicator (CBI) grew 23.2 percent month over month as big projects continue to ramp up across the country, particularly in the Southeast.
    • CBI indicates the amount of work that will be performed by commercial/industrial contractors in the next few months based on projects currently in the pipeline.
  • Office, industrial and retail construction all grew year over year, with retail showing 24.4 percent growth as retailers seek innovative ways to attract new consumers.

JLL believes the following markets are ones to watch:

Nashville

Nashville has seen rapid construction growth as employers take advantage of its low-cost, well-educated workforce. This follows the broader trend in the Southeast, as office, industrial and retail have all seen an increase in activity over the last year.

San Francisco

San Francisco is catching up to New York in terms of cost to build, driven by demand and high labor costs. Although all major coastal cities will continue to see cost growth, it is possible for San Francisco to become the most expensive market in 2016.

Houston

The decline in energy prices has begun to hit Houston, which experienced a 120.1 percent decrease in office construction activity year over year. The market has seen a growth in subletting opportunities and has low-cost labor, which could be attractive to occupiers wanting to avoid high-cost markets.

Dallas

Dallas saw an increase in retail construction as retailers followed population flows to Texas. It was one of the only markets that experienced retail development growth.

As a base for comparison, here are the top 20 U.S. metropolitan areas where the most money was spent on new construction in 2015 according to Dodge Data & Analytics.

  1. New York, NY
  2. Dallas, TX
  3. Houston, TX
  4. Los Angeles, CA
  5. Chicago, IL
  6. Washington, D.C.
  7. Miami, FL
  8. Boston, MA
  9. Atlanta, GA
  10. Seattle, WA
  11. Lake Charles, LA
  12. Phoenix, AZ
  13. Orlando, FL
  14. San Francisco, CA
  15. Denver, CO
  16. Austin, TX
  17. Nashville, TN
  18. Tampa, FL
  19. Twin Cities, MN
  20. San Antonio, TX

While they are not intended to serve as the be-all and end-all, these trends provide some good food for thought as leaders of engineering and construction firms execute their plans for the remainder of the year and beyond.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Office building construction worker, Flickr)

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