CHICAGO—JLL's new report on the state of the US construction industry may not be as optimistic as the outlook it published earlier in the year, but Todd Burns, president, project and development services, tells GlobeSt.com that confidence, though tempered, remains high.
“Clearly, we all know we've been riding a nice wave over the past few years,” he says, and it may be difficult for the economy to sustain its current level of construction activity. For one thing, “people are unsure about the results of the recent presidential election, and that means there are some unknowns.”
Spending on commercial construction hit $317 billion in the third quarter, JLL finds, and even though that was a 1% increase year-over-year, previous third quarters had seen growth between 7% and 10%,
Still, Burns has not seen anything that appears truly alarming. “We're seeing a small slowdown in the Northeast,” he says, but other than that, the US economy looks strong. In fact, the South had a quarter-over-quarter workload growth rate of 10.3%, the best of any US region.
The plans being kicked around by Congress and the presidential transition team for a massive infrastructure effort could mean a significant boost in spending, he adds, if done right. Furthermore, any new infrastructure, whether its roads, tunnels, bridges or airports, could also spark more commercial development in the areas surrounding it.
But whatever happens with those plans, Burns already sees a lot of bright spots for US builders. Spending in the higher education sector, for example, continues at a very high level with no end in sight. High-end, luxury student housing has become a must-have for many schools. “This is a war to attract new students, and every university is in it.”
And the growth rate of industrial deliveries continues to increase year-over-year, JLL reports, with the under-construction pipeline remaining steady at 204.3 million square feet. Vacancy in the sector has continued to decline and just hit 5.8% – the lowest rate in more than 16 years.
Metrics for the US hotel industry continue to suggest that the sector is stabilizing at normal levels. The supply pipeline has increased 1.5% year-to-date, and Burns says much of this is driven by demand for new select-service hotels.
Retail also looks healthy. The under-construction pipeline continues to climb, reaching 82.4 million square feet in the third quarter. Starts are at their highest in the Southwest region, boasting 6.7 million square feet in the last quarter.
The office construction pipeline also reached its highest point this cycle at 105.4 million square feet in third quarter, up 4.8 million square feet from last quarter. But starts declined by 10.6 million square feet this quarter, illustrating a possible hesitancy to begin new projects.
“None of us has a crystal ball, but absent any big worldwide economic event, the next 12 to 18 months looks pretty good,” Burns says.
CHICAGO—JLL's new report on the state of the US construction industry may not be as optimistic as the outlook it published earlier in the year, but Todd Burns, president, project and development services, tells GlobeSt.com that confidence, though tempered, remains high.
“Clearly, we all know we've been riding a nice wave over the past few years,” he says, and it may be difficult for the economy to sustain its current level of construction activity. For one thing, “people are unsure about the results of the recent presidential election, and that means there are some unknowns.”
Spending on commercial construction hit $317 billion in the third quarter, JLL finds, and even though that was a 1% increase year-over-year, previous third quarters had seen growth between 7% and 10%,
Still, Burns has not seen anything that appears truly alarming. “We're seeing a small slowdown in the Northeast,” he says, but other than that, the US economy looks strong. In fact, the South had a quarter-over-quarter workload growth rate of 10.3%, the best of any US region.
The plans being kicked around by Congress and the presidential transition team for a massive infrastructure effort could mean a significant boost in spending, he adds, if done right. Furthermore, any new infrastructure, whether its roads, tunnels, bridges or airports, could also spark more commercial development in the areas surrounding it.
But whatever happens with those plans, Burns already sees a lot of bright spots for US builders. Spending in the higher education sector, for example, continues at a very high level with no end in sight. High-end, luxury student housing has become a must-have for many schools. “This is a war to attract new students, and every university is in it.”
And the growth rate of industrial deliveries continues to increase year-over-year, JLL reports, with the under-construction pipeline remaining steady at 204.3 million square feet. Vacancy in the sector has continued to decline and just hit 5.8% – the lowest rate in more than 16 years.
Metrics for the US hotel industry continue to suggest that the sector is stabilizing at normal levels. The supply pipeline has increased 1.5% year-to-date, and Burns says much of this is driven by demand for new select-service hotels.
Retail also looks healthy. The under-construction pipeline continues to climb, reaching 82.4 million square feet in the third quarter. Starts are at their highest in the Southwest region, boasting 6.7 million square feet in the last quarter.
The office construction pipeline also reached its highest point this cycle at 105.4 million square feet in third quarter, up 4.8 million square feet from last quarter. But starts declined by 10.6 million square feet this quarter, illustrating a possible hesitancy to begin new projects.
“None of us has a crystal ball, but absent any big worldwide economic event, the next 12 to 18 months looks pretty good,” Burns says.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
