It's all a bit of a change from the beginning of 2016, when the company's construction report expressed more optimism, especially about the industrial sector. It was felt that there was enough pent-up demand to keep the market growing for the next several years.

“Although current US construction volumes remain steady and growing, investors, financiers and contractors alike are beginning to approach decisions with caution, weighing risk and opportunity,” according to JLL today. “Confidence indicators in the construction, development and lending industries are beginning to falter, depicting a changing mind-set as tides begin to turn.”

CHICAGO—US construction spending in 2016 has continued to set records, reaching $317 billion in the third quarter, a 1% increase year-over-year, according to a new report on the non-residential construction industry from JLL. Still, in the recent past, third quarter growth usually averaged between 7% and 10%, and company officials believe the small increase could indicate an impending slowdown.

Several factors seem to be at work. Developers already have a robust construction pipeline, for example, and face rising costs and a shrinking labor pool. Materials costs have reached a 2.2% growth rate year-over-year, a five-year high, largely due to a high demand for lumber. Building costs as a whole have increased in the third quarter, seeing a slow but steady rate of 2.6% growth year-over-year.

“The construction industry is cyclical and a national slowdown is to be expected,” says Todd Burns, president, project and development services. “In 2017, industry players will be closely monitoring real estate decisions, per project staffing and tech and hardware innovations to get the most bang for their buck.”

JLL's report also cites the Construction Backlog Indicator – a tool developed by Associated Builders and Contractors Inc., a national construction industry trade association, that reflects the amount of work commercial contractors will do in the months ahead – and it shows a national average of more than eight months of work ahead for contractors. “Over the course of 2017, US markets can expect softening construction volumes as demand and market saturation begins to level out across property types,” according to the JLL report.

It's all a bit of a change from the beginning of 2016, when the company's construction report expressed more optimism, especially about the industrial sector. It was felt that there was enough pent-up demand to keep the market growing for the next several years.

“Although current US construction volumes remain steady and growing, investors, financiers and contractors alike are beginning to approach decisions with caution, weighing risk and opportunity,” according to JLL today. “Confidence indicators in the construction, development and lending industries are beginning to falter, depicting a changing mind-set as tides begin to turn.”