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Dive brief:
- The American Institute of Architects warned this week spending on non-residential buildings will decrease in 2024 and 2025.
- Spending on these types of buildings will rise 4% in 2024, well below last year’s 20% increase, and gains will slow to just over 1% in 2025, according to the latest consensus construction forecast from the AIA.
- Commercial facility spending will be flat this year and next, manufacturing construction will rise nearly 10% this year before leveling off in 2025, and institutional construction will see mid-digit gains this year and next , according to the report.
Diving knowledge:
The report blamed the expected fall on tighter credit, higher input prices, falling commercial property values and structural changes in construction demand, and said the slowdown is already underway.
The forecast preceded another depressed reading from the Architecture Billing Index, which uses the organization’s data to forecast nonresidential construction activity nine to 12 months into the future. The index currently stands at 45.4, below the average mark of 50; anything below that means a slowdown in activity.
Along with the AIA, other economists have detected indicators that a slowdown is still looming. Associated Builders and Contractors economist Anirban Basu noted last week that despite three consecutive months of price moderationgeopolitical factors could still play a large part in the economic environment.
“Piracy in the Red Sea and the resulting diversion of Suez Canal ships around the Cape of Good Hope has caused global freight rates to almost double in the first two weeks of 2024, according to the Freightos Baltic Index,” Basu said. “All the same, rising shipping costs will increase pressure on certain inputs.”
However, builders are seeing some relief on the ground: costs are coming down for road builders, i the backlog grew in December.
