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%.
