We’ve all been hearing them lately… the warnings about an upcoming recession. Many industries are anxiously anticipating what’s to come and what it may mean for their businesses. For those who are in the construction industry, it may seem especially worrisome considering the struggles that are already present such as supply chain delays and cost increases. Not to mention the impacts of higher interest rates, home prices and living costs. It all makes everything feel a little uncertain. If you’ve been holding your breath; relax. People have been looking into the tell-tale signs of what’s in store for the construction industry, and the outlook is good. Need a little reassurance? Let’s take a look at a few of the green lights we’re seeing for the near future.
First of all, both public and private construction projects have shown no signs of slowing down. In fact the opposite seems to be happening. Are you familiar with the Infrastructure Investment and Jobs Act? Last November, this Act authorized the release of funds for numerous categories of infrastructure projects. $1.2 Trillion in funds. Projects from these funds should begin in the second half of 2022 and continue throughout 2023. Beyond this, reports show that most states are already in a strong revenue position for boosting construction spending. So on the public side things are looking well. In the world of private nonresidential construction, reports on demand for distribution facilities are strong. There are consistent announcements for new and expanding manufacturing plants to produce a variety of products and it seems that this will continue. The growth in areas such as alternative energy generation, transmission distribution, utility-scale power storage and battery charging stations means more construction everywhere. Finally, despite those higher interest rates, home prices, and the effects of inflation that we mentioned earlier, demand is still strong on the private residential side as well. Following a decent period of underbuilding relative to the number of new households, we’re still seeing a build up of demand for both single and multi-family properties. In February we could see that developers had taken out 117,000 multi-family permits that had not yet started construction. This number showed a 27% increase from a year earlier, giving us strong indications that there will be plenty of apartment construction to come.
Beyond looking directly within the construction realm, we can learn a lot from an associated industry – architecture. Each month, The American Institute of Architects (AIA) surveys several hundred architecture firms to learn if their billings are higher or lower than they were the month before. When reports of higher billings exceed reports of lower billings, AIA’s Architecture Billing Index is set above a breakeven level of 50. AIA tells us that a reading above 50 correlates with an anticipated increase in nonresidential building. As of January, the index had been above 50 for 12 straight months. This follows a year of sub-50 readings, showing us that an upturn in construction is upon us.
While the past couple of years have certainly brought about uncertainty, it appears that our valued construction industry can breathe a sigh of relief for now. Ahhh…
