Continued Growth in Commercial Real Estate

The good news seems to be continuing for the construction industry.

See also Real Estate

Even the casual observer can see that there is an increase in the amount of construction work across the Denver metro and along the Front Range. Although it seems like it took construction the longest to recover, it was recently shared that in 2015 there was another period of year over year growth. It is also expected in 2016 for this growth trend to continue. While construction companies may not yet be operating at pre-recession levels, they are able to benefit from the continued increase in commercial construction. To help our clients, prospects and others understand the growth cycles and how they can benefit from them, Hanson & Co., has provided a brief summary of key points below.

Past Economic Impact

The “Great Recession” that began in December 2007 and ended in June 2009 hit the construction industry harder than many others, resulting in a significant drop in the value of total construction put in place – from $1.167 trillion to $778.2 billion, a massive 33.3% decline from its peak in 2006 to the bottom of the construction business cycle in 2011.

The value of non-residential construction activity peaked in 2008 but sharply declined 25% over three years to 2011. That’s when construction spending started turning around again. In 2014, the total value of construction put in place was 21.8% greater than construction spending in 2011, with 2014 alone registering a solid gain of 5.4%.

Construction spending for certain types of property has been increasing at a relatively smooth pace through their respective growth cycles. Since the bottom of the cycle in 2011, total construction spending for 10 non-residential building types has increased by 14%. Particular building categories have made even stronger gains, including:

  • Lodgings - 83%

  • Manufacturing - 33.6%

  • Retail - 31.2%

  • Office - 28.9%

  • Transportation and warehouse - 20%

Forecasted Construction Trends

According to economic reports from the NAIOP Research Foundation, a commercial real estate development association, construction spending is projected to grow even faster as the U.S. economy’s expansion gains momentum.

Current forecasts show the construction sector continuing its upward trend in the value of construction put in place, although different building types will experience different performance patterns. Non-residential building construction spending will likely see an uneven growth trend, impacted by some weakness in manufacturing and energy-related construction in 2015 and 2016, while construction spending for retail, office, and healthcare buildings is projected to remain strong with a peak in 2016 and 2017. The good news is that construction spending as a whole is predicted to continue to grow at mid-single digit rates at least until the end of the decade – even outpacing the U.S. economy’s growth rate.

Contact Us

The good news is the amount of construction work is continually growing. It’s important to ensure your company is properly positioned to take advantage of the robust construction economy at the most profitable level possible. If you have questions about how to ensure your company is optimally performing, Hanson & Co, wants to help. For additional information, please contact us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.