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Rosy Outlook on New Construction in 2016

CHICAGO—JLL expects pent-up demand to keep driving the industrial; sector forward, and education should also continue to shine in 2016.

By Brian J. Rogal | brianjrogal | | Updated on February 29, 2016

 

chi-Todd-Burns2 Todd Burns, president, project and development services, JLL Americas
CHICAGO—As reported last week in GlobeSt.com, JLL just put out a study that forecasts a strong 2016 for the non-residential construction industry. The forecast was especially optimistic about the industrial sector. Todd Burns , president, project and development services, JLL Americas , tells GlobeSt.com that a healthy 178.4 million square feet of new industrial space was delivered in 2015, and he expects to see similar numbers for a while. “ There is enough pent-up demand for the next several years barring an unforeseen event like 2009,” he says. And much of the sector’s strength comes from the burgeoning logistics market as retailers of all types continue to build new infrastructure as they seek faster ways to deliver products to consumers. It is hard to predict when this part of the market will reach a plateau or downward slope, but JLL is currently seeing “a nice steady stream” of these projects. “It feels like we have a way to go.”    But it would be a mistake, he adds, to think that today’s industrial sector is entirely driven by the transformation happening in product distribution. Light manufacturing and assembly has also become a top performer and shows every sign of staying that way. In fact, the value of manufacturing space under construction in November 2015 reached $84.1 million, a 22% year-over-year increase.                Another standout in 2015 was the education sector, Burns says. In terms of project value, construction activity grew by more than 12% year over year, mostly attributed to spending on higher education facilities. “If you spend time on any campuses, you will be amazed by the amount of work being done to lure students.” On a recent visit to a major state university Burns “saw no less than seven different housing developments under construction,” each with resort-style amenities and worth more than $10 million. In addition, the same school was also building new sports-related facilities and research centers. However, “the cost of tuition feels like it has peaked,” and in the next few years universities and colleges will probably pay for all this new infrastructure through higher ticket prices at sporting events and charging more for room and board at the splendid new student housing developments.                The outlook for retail is a bit more mixed, says Burns. “I haven’t seen a lot of spec retail development lately.” The challenge posed by online retail has made many in the industry somewhat cautious, and more inclined to adapt their stores to accommodate new technologies and the omnichannel shopping experience. “What you get now is a lot of renovations.” Still, some portions of the retail sector have a much brighter outlook. Burns is quite bullish, for example, on the prospects for growth among fast-food outlets such as Chipotle and Chick-fil-A . “The lifestyle that people lead today still generates a need for these types of facilities.”

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