The construction industry is going to have a tough time topping 2015.
Last year was the best we have seen for office completions since 2010, according to a recent JLL report on 2016’s construction outlook. There was 88.5 million square feet of offices underway by 2015’s end up from 81.2 million square feet during the same year-ago period, and the other commercial real estate sectors were strong as well.
Construction executives polled by JLL said that they believe growth in the industry will remain stable throughout 2016 but just not grow as much as last year. Among the reasons for this:
- Economic uncertainty due to the presidential election, and a lack of new government construction due to the debt ceiling.
- A slowdown in the global economy, most notably China.
- Rising wages in the construction industry.
- A increase in sheet glass costs.
There is plenty of upside, though. Renovations of existing buildings will continue to be a huge part of the construction industry, as more firms look to convert their spaces into creative-office environments.
Also, some markets in the South, such as Atlanta; Charlotte, N.C.; and Charleston, S.C.; are seeing an influx of companies enter their areas because of inexpensive labor costs, and as a result, those metros are poised for increased construction activity. Additionally, secondary tech markets, like Austin, Texas; and Chicago are forecasts to see growth.
Houston is one of the country’s big office trouble spots right now, due to lower energy costs. That metro area’s available sublease space is also looking at record highs.
One hot commercial real estate sector, industrial, should continue to see plenty of growth. There was 174.8 million square feet of product delivered last year, and it’s not slowing down by much. Surprisingly Atlanta and Dallas each had more industrial construction last year than California’s Inland Empire, which is arguably the largest distribution hub in the country.
Despite the sector, the prices of many vital materials, such as steel, asphalt and reinforcing bars are predicted to drop over 2016.
So, don’t expect a record year, but the construction industry should do just fine as 2016 unravels.