AIA Economist Bullish on Nonresidential Construction Activity

By: Jane Martinsons, Metal Construction Association

Kermit Baker, AIAKermit Baker, chief economist for the American Institute of Architects in Washington, DC, told attendees at the recent MCA Annual Meeting in Clearwater Beach, FL, that although nonresidential construction has been slow to recover from a steep downturn in 2013, several emerging signs point to increased activity throughout 2014.

As a guest speaker at the January meeting, Baker noted several leading economic indicators that point to an improving economy, including that housing starts have accelerated in recent months and that house prices, which continue to recover, have gained back more than 40% of their losses. He also said that net household growth has been dominated by renters in recent years, pushing down the rate of ownership.

“The housing recovery is well underway, but production levels are still below long-term potential,” Baker said, adding that a rate of 1.6–1.8 million housing starts per year is still years away.

Despite the positive market fundamentals, there have been modest gains in spending on nonresidential buildings, Baker said. He noted that the nonresidential construction sector faces several challenges and opportunities, including that recovery to date remains modest, with little improvement over past year; commercial property values are recovering “nicely”; and real estate market fundamentals, such as vacancies and rents, remain positive for most commercial market segments.

Meanwhile, architecture billings point to emerging upturn in nonresidential building activity. “Even with slowdown toward the end of last year architecture billings are in the midst of an upturn, with the strongest growth since the recession began,” Baker said.

Baker added that construction spending should see solid single-digit growth in 2014, with recovery continuing into 2015.

Plans for the MCA Summer Meeting, set for June 23–25 at the Westin O’Hare in Rosemont, IL, are underway. Online hotel reservations and a preliminary program schedule are now available. For more information, visit the Events page on the MCA website.

2 thoughts on “AIA Economist Bullish on Nonresidential Construction Activity

  1. No doubt economy is moving in a positive direction but still lots of efforts to do. Article is quite informative one which is depicting the images of economic conditions. Thanks for providing info through your article.

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