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Double-Digit Construction Spending Forecast
Big Jump in Nonresidential Sector Predicted

Gilbane, a leading U.S. building company, is projecting total construction spending will go up nearly 11 percent this year, and that the nonresidential sector alone will gain more than 20 percent.

Total construction spending will increase nearly 11 percent, and the nonresidential sector alone could see a gain of more than 20 percent, when 2015 comes to a close.

Construction behemoth Gilbane has issued those and other predictions in its "Construction Economics Report: Building for the Future."

The segments of residential, nonresidential and non-building structures, such as bridges and highways, comprise total construction spending.

Gilbane said total construction spending is increasing at the fastest rate since 2004-2005, at least through the first half of the year, and is forecasting growth of 10.9 percent in 2015, to $1.067 trillion. If this prediction turns out to be true, it would be the second highest total ever.

Construction starts are forecast to increase 13.1 percent to 670,595 units in 2015, and the building firm also says total construction will climb 8 percent in 2016.

As for nonresidential spending, Gilbane says it could very well jump 20.2 percent to $396.7 billion in 2015.

Nonresidential building starts hit a 10-year low in 2012, but have been increasing at an average of 17 percent annually since then, Gilbane said.

Results will be mixed for each individual category that makes up the nonresidential category, but some sectors will see pronounced gains:

Manufacturing will be up nearly 50 percent at $86.4 billion in 2015. No market sector has ever recorded a 50 percent year-to-year increase.

Education will experience growth of 7.1 percent this year and expand by 9 percent in 2016, while health care is slowly recovering after hitting an eight-year low in 2014 and should improve by 7 percent.

Commercial-retail will jump by 8.8 percent to $68.2 billion this year. Commercial-retail is expected to realize a gain of 5.4 percent in 2016.

Office spending is on pace to grow 21.2 percent this year, after experiencing a gain of 21.3 percent in 2014. This category should rise 8.4 percent next year.

In residential construction, Gilbane said this sector should grow this year by 12.9 percent to $388 billion, and then soften in 2016 with a 0.7 percent increase.

The single biggest obstacle to growth is the lack of an adequate labor pool, Gilbane notes. The number of unfilled building trades positions has exceeded 100,000 for 26 of the 28 months through June 2015. This statistic has been steadily moving upward since 2012.

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Homeowners of close to 760,000 properties regained equity in the second quarter, reducing the number of homes with mortgages that are lower than their properties' value to about 46 million.

This equates to about 91 percent of all mortgaged properties, according to a second-quarter equity report from CoreLogic.

"For much of the country, the negative equity epidemic is lifting," Anand Nallathambi, CoreLogic's CEO and president, said, "The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets."

CoreLogic predicts home prices will rise another 4.7 percent this year, and if that prediction holds true, 800,000 homeowners could realize positive equity by mid-2016.

The majority of the positive equity is in the high-end housing market. CoreLogic said 95 percent of homes valued at more than $200,000 have equity, compared with 87 percent of homes valued at less than $200,000.

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July 21, 2019, 1:18 pm PDT

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