Healthcare, Amusement/Recreation Sectors Lead Growth for Institutional Construction Spending, AIA Reports

While spending on nonresidential construction picked up momentum toward the end of 2022, construction spending will moderate in 2023 and slow significantly in 2024, according to a new report from the American Institute of Architects. The institutional categories saw modest spending growth last year, with healthcare and amusement/recreation being the only major sectors with increases of 5% or more.

Despite macroeconomic headwinds such as inflation, rising interest rates and weak consumer sentiment scores, the AIA’s Consensus Construction Forecast panel — comprising leading economic forecasters — is projecting nonresidential construction spending to grow 5.8% in 2023 but slow to under 1% in 2024. Similar to 2022, growth in construction spending in 2023 will be uneven with a projected 2.6% increase in the commercial sector, 15.1% for industrial facilities, and 4.1% for institutional buildings.

In 2024, spending on commercial buildings is forecast to decline 1.4%, while industrial projects gain a modest 0.4% , and a 3.8% increase for institutional facilities.

Overall, the institutional sector is projected to keep the overall nonresidential building market in the growth category. The 4% expected growth for 2023 is projected to fall only modestly to just below 4% for 2024. The two key pillars of the institutional market – healthcare and education – are both projected to have relatively healthy years with growth in healthcare spending slowing modestly to 3.2%, and education accelerating to 4.6%.