In some sectors, new starts and spending have far exceeded even the early 2000’s as the U.S. emerges from three years of pandemic footing. Other sectors, like single family residential and office space, seem primed to continue their post-pandemic hangovers as building use needs change.
Construction continues to fuel economic growth with manufacturing and non-building construction at a “torrid pace” according to the American Institute of Architects’ (AIA) Kermit Baker as part of the organization’s Consensus Construction Forecast and Panel.
“That pace of growth hasn’t been seen since the construction boom years leading up the Great Recession. Leading the charge is the manufacturing sector, where spending is projected to increase more than 50% [in 2023] on top of an exceptional performance last year.” Baker, AIA’s chief economist, anticipates healthy gains across the board, with double-digit gains in 2024 for commercial and institutional construction and a 7% average across-the-board rate of growth.
According to AIA’s forecast, hotel, industrial, institutional, public safety, education, health and total non-residential construction spending is all expected to rise in 2024, along with a great deal of the non-building construction growth spurred by the Bipartisan Infrastructure Law and its billions in individual grants.
Meanwhile, ENR reports that the Dodge Construction Network anticipates growth in even more sectors, seeing an 11% rebound in lagging residential construction overall, with individual gains in single-family and multi-family of 9% and 14% respectively. Dodge’s outlook concurs with the AIA’s regarding manufacturing/industrial, education, health care, lodging, and non-building construction, putting the latter at a forecasted 7% increase in 2024 following a 25% increase in 2023.
Further, Dodge anticipates highways & bridges to continue their construction charge, trending 23% higher in the coming year after a 14% gain in 2023, again, driven by new federal infrastructure spending.
A Surprising Retail Bright Spot – Rural Retail Expansion
“Rural construction for non-residential has actually picked up to about $10 billion in activity over the last couple of years,” Dodge’s Richard Branch said. He goes on to say that Dodge is “seeing a lot of retail activity” that they expect to continue through 2024.
Considering the significant lag in retail numbers – down 20% through mid-year 2022 according to Construction Analytics – the movement in retail to renovate and expand existing buildings and a push into rural retail opportunities – are welcome trends to a construction sector that has been foundering. Dodge anticipates 9% growth in retail renovations and expansion on top of retail’s movement into rural communities that have been historically underserved.
Warehouses & Offices Continue to Decline
After a meteoric boom in warehousing, largely spurred by Amazon and the necessity of online retail shopping during the pandemic, warehouse starts were down 18% in 2023, and are anticipated to fall an additional 11% in 2024. According to Branch, Amazon, which was responsible for 16% of warehouse construction, “essentially stepped aside,” necessitating a “realignment that continues in 2024.” Warehouse construction losses, paired with the continuing slide in office construction, are the two main sectors dragging down the industry overall.
The 2% decline in office starts predicted for 2023 is misleading because of the changing use of offices. There is “aggressive growth” in data center construction, which falls under this category. However, as reported by Dodge’s Branch, “When we pull out data centers, the 2% drop in overall office construction drops further by 6%.”
Is Adaptive Reuse the Answer to Flagging Office Construction?
One emerging trend on the horizon for high rise office space is adaptive reuse.
Merriam Webster defines adaptive reuse as the renovation and reuse of pre-existing structures for new purposes. It’s hardly a new idea, as evidenced by the makeover of New York’s Meatpacking District and industrial & warehouse spaces across the country into lofts, apartments, and condominiums.
In 2017, CNN reported that “Warehouse conversions are sweeping the globe,” citing the continuing trend of reclaiming industrial spaces as residential living solutions that started in the 1990s.
And as architects and developers looked for ways to turn their fortunes around mid-pandemic in 2021, CNBC looked at 10 cities who had already begun developing office buildings into apartments to meet housing demand.
Not surprisingly, New York is leading the way in adaptive reuse initiatives, with Washington, D.C., Cleveland, Ohio, Philadelphia, Pennsylvania, Chicago, Illinois, Alexandria, Virginia, and Los Angeles, California also in the mix.
One of the most exciting possibilities to emerge from adaptive reuse in urban areas is the ability to remake office spaces into mixed-use properties with a variety of retail, restaurant and bar, and residential spaces all in one building.
Tremendous planning is required to effectively and safely convert office space to residential units. As City Signal reported in late 2022, many of the structures were built on 25,000 square foot slabs so they could be flexible for cubicles and partitions based on shifting corporate needs.
These designs also capitalized on natural light, but only on the exterior of the slab, which means the “easy” fix for adaptation is to turn a doughnut of exterior-facing offices into residences.
All that windowless space in the interior is just one of the many reasons that multi-unit residential buildings require a complete retrofit to make the most of their space.
As per City Signal, “…multifamily properties also need to include sufficient allocation for utilities such as plumbing, electrical conduits, and HVAC ductwork, as well as safety accesses like stairways, egress windows, and fire-protected exits… To make them fully operational, developers need to completely rework the property’s design to include additional skylights, elevator access, utilities, scrap dated features like drop tile ceilings, install bathrooms and kitchens for each unit, and so on.”
Proper Renovation and New Construction Planning Requires Accurate Scans
When planning for retail renovations, or adapting and reusing office space into residential space, every concrete core for wall anchors, electrical conduit, piping, HVAC, updated safety measures, drop ceilings, etc. needs a concrete scan so that developers and contractors can avoid hitting PT cables, rebar, and existing embedments.
Further, millimeter-accurate 3D laser scanning is a necessity for planning purposes so that designers and engineers can take actual existing infrastructure into account as they imagine new spaces and uses.
And new construction of buildings and infrastructure needs all that, plus NASSCO-certified CCTV video pipe inspections, and accurate utility and subsurface infrastructure mapping so that general contractors and their teams can avoid utility strikes, and cross bores.
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Frequently Asked Questions
Is 2024 a good year to build a house?
Building supply costs have risen as much as 40.5% in the last two years. However, sliding residential construction rates and prices may contribute to a stabilization in the housing market, but that remains to be seen.
How much has COVID affected construction costs?
According to an article at jdsupra.com, pre-pandemic construction cost estimates can be off by as much as 40.5%, and if the house or building contains defects (the difference between the planned construction and the actual construction as-builts), they will need to be remedied. The fastest way to achieve accurate as-builts is through Intelligent Visualization that includes 3D laser scanning, concrete imaging, utility mapping, video pipe inspection, and mapping & modeling services to provide updated as-built records vs. “as intended” plan or record drawings.
What is the construction market outlook for 2024?
Manufacturing and infrastructure spending are leading a surge in construction growth for 2024 as both the CHIPS & Science Act and the Bipartisan Infrastructure Law provide funding for projects on a state-by-state grant basis. One upside is that states are doing their best to provide matching funds for many federal grants, increasing the available capital for expansions and improvements.