US Total Nonresidential Construction spending accelerated through the end of 2023. Spending for the year totaled a record $1.103 trillion, a 19.8% increase over the 2022 total. However, performance was far from uniform, with results varying considerably by geography and asset class. Firms need to be attuned to these disparate trends, as well as to where Nonresidential Construction is headed next, to maximize profits during this business cycle.
What are some of the themes we are seeing right now? First of all, the private sector of nonresidential construction (up 21.9%) is outpacing the public side (up 16.5%), driven in part by surging Private Manufacturing Construction (up 70.9%). The past is not the future, however. Manufacturing activity in the nation is beginning to decline, and we will likely see growth slow in this segment of commercial real estate (CRE) as 2024 progresses.
Another trend to consider is movement within single-family housing starts. Why would we cover housing starts in a webinar on nonresidential construction? Keep in mind that housing starts lead nonresidential construction by around two years – homes are started and built, and then associated demand for commercial real estate picks up down the road.
We have seen a big change in housing starts activity in recent years. Activity fell off in the second half of 2022 and into the first half of 2023 as affordability issues worsened for would-be buyers, but we have since seen a rebound in building activity. In addition, permitting activity has not been even; there are significant regional performance differences tied to demographic patterns and affordability. All of these trends in residential construction will have an attendant impact on nonresidential construction, but in a delayed fashion.
Join ITR Economics Senior Forecaster and Speaker Connor Lokar as he delves into these trends and more during our February Insider Business Series webinar. Attendees will leave with a better understanding of where nonresidential construction is now and where it is headed as well as a good handle on the risks and opportunities within the industry.
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