A Booming Construction Segment

Readers of our Trends Report™ know that we have since the end of the COVID recession attributed a portion of the activity in US Private Office Construction to data centers.

During the pandemic, the prognosis for Office Construction appeared, to many, to be somewhat apocalyptic due to widespread adoption of work-from-home policies among white-collar employers. However, the apocalypse failed to materialize.

The pandemic-era decline in Office Construction was no worse than that in overall US Private Nonresidential Construction, with both declining around 5% during that time.

Some of this dynamic is attributable to Data Center Construction. Data Center Construction has long been a component of Office Construction, but the data source for Office Construction – the US Census Bureau – only this year began publishing data for this specific subsegment. The Private Data Center Construction data starts in January 2014; the 12-month moving total, therefore, begins in December 2014.

As seen, Data Center Construction has been in a rising trend for as long as the data has been tabulated.

• The rise relaxed significantly during the pandemic years, but, in contrast with other nonresidential construction sectors (including overall Office Construction), the rise persisted.
• While the shift toward work-from-home policies and hybrid workforces reduced demand for space for bodies to work in, it did not reduce demand for space for computing and data infrastructure.
• The more recent steep ascent in Data Center Construction has occurred alongside innovations and progress in the AI field as well as government investment in the tech sector.
• The 12/12 is also rising, and the pertinent ITR Checking Points™ are positive, suggesting more Phase B, Accelerating Growth, ahead ahead.

The strong Data Center trend raises a question – how has overall Office Construction performed without that segment? As is seen in the next chart, not particularly well.

• Like most nonresidential construction segments, Office Construction (excluding data centers) received a post-pandemic bump, but not to the pre-pandemic level, and it has since declined.
• Construction is down about 15% from the high established at the outset of the pandemic.
• At -11.9%, the 12/12 rate-of-change was at a record low as of May (the dataset only goes back 10 years).
• The ITR Checking Points™ are negative, suggesting more Phase D, Recession, ahead for Construction.

What it means:

• Data Center Construction is a more opportune field than traditional Office Construction.
• Data Center Construction accounts for a growing proportion of overall Office Construction – 4.6% of the total in 2014 versus about a quarter of the total today.

What to do:

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