Nonresidential Construction to Spike Through 2019

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Construction isn’t going to slow down soon anytime soon. Although the industry faces rising material costs and labor shortages, the American Institute of Architects projects that construction spending for nonresidential projects will increase by 4 percent in 2018 and will continue to grow at a similar pace through 2019. AIA expects the commercial and retail construction sectors to experience much of the gains in 2018, but the industrial and institutional construction sectors will make up the bulk of growth by 2019 as clients focus on sustainability and prefabrication. To make room for new construction opportunities, Portland demolition contractors will be busy preparing sites.

U.S. Economy Supporting Portland Demolition and Construction Growth

With eight and a half years in the current economic cycle, the U.S. economy remains stable. Thanks to strong business investments and the lowest unemployment rates since 2000, the economy grew by 2.3 percent in 2017, exceeding the growth seen in 2016. This growth is allowing companies to expand their operations.

In 2017, spending on nonresidential construction grew by only 2.5 percent, which was less than expected. Similarly, spending on manufacturing facilities saw a double-digit decline. Retail and other commercial facilities, however, experienced robust growth.

Despite a healthy job market, vacancy rates in office buildings rose to 16.5 percent in the first quarter of 2018. Flex-spaces and warehouses have experienced increased demand as a result of failing shopping centers and strong growth in e-commerce sales, which require distribution facilities and logistics operations. As a result, analysts expect low vacancies and higher rent rates to drive investments in new construction.

Behind the Expected Optimistic Construction Growth

While the recent slowdown in construction spending suggests a drop in overall spending in 2018, the AIA expects the nation to experience modest growth in 2018 and great performance in 2019 because:

  • Infrastructure package expectations: The Trump administration made an infrastructure investment program a priority and unveiled the details in February 2018. The plan supports the modernization of rural infrastructure, rebuilding failing infrastructure, spurring innovative projects, shortening and simplifying project approval processes, and giving state and local governments more decision-making authority. Portland demolition companies will find themselves working closely with local governments to prepare project sites for upcoming improvements.
  • Rebuilding after natural disasters: In 2017, the country experienced $306 billion in losses from major natural disasters, such as wildfires, floods and hurricanes. Repairs and rebuilding will produce opportunities for the demolition and construction sectors. Research suggests that peak construction spending occurs two or three years after an event.
  • Construction tax reform: Tax reform packages that reduce nominal tax rates for businesses will allow companies to invest the savings they experience back into their businesses. Tax reform’s limits for the deductibility of mortgage interest may reduce tax preferences for homeownership, which could slow down residential construction.
  • Consumer confidence: The fourth quarter of 2017 showed the highest boost in consumer confidence in nearly two decades. Business-related confidence levels are also high, indicating a wiliness to spend and invest.

What Nonresidential Construction Growth Means to Portland Demolition Companies

While 2017 had a disappointing performance, experts have a positive outlook for 2018 and 2019 in regard to nonresidential growth spending. They anticipate the strongest growth in 2018 to come from commercial sectors, particularly office, retail and lodging facilities. By next year, commercial sectors will experience slower growth as construction spending increases in healthcare, education and industrial facilities. Industry demand for demolition is on the rise because of greater construction levels, infrastructure development and urban growth. As the value of nonresidential construction increases, the need for Portland demolition services will also grow and bring in new investors.

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