The American Institute of Architects went on to warn recently of a slowdown in spending on non-residential buildings this year as well as in 2025.
Apparently, spending on these kinds of buildings will witness a surge of 4% in 2024, which is indeed much less than the 20% rise that was seen in 2023, and the gains will also slow to just more than 1% in 2025, as per the latest Consensus Construction Forecast of AIA.
Spending when it comes to commercial facilities will be flat in 2024 and also in 2025; manufacturing construction will see a rise of around 10% this year right before getting stabilized in 2025; and institutional construction will witness mid-single-digit highs this year and next, said the report.
It is well to be noted that the report went on to blame tighter credit, rising input prices, commercial property value dips, as well as structural alterations in demand for construction when it comes to the forecasted dip, and remarked that the slowdown is already going on.
Interestingly, the forecast also preceded yet another depressed reading from the Architecture Billings Index, which makes use of the organization’s data so as to predict non-residential construction activity taking place between 9 to 12 months in the time to come. The index at present sits at 45.4, which apparently is below the median mark of 50, and anything below that implies slowing activity.
With AIA, other economists too have gone on to spot indicators showing that a slowdown may still be looming. Anirban Basu, who is the Associated Builders and Contractors economist, noted recently that in spite of the three consecutive months of moderation in prices, geopolitical elements could still go on to play a heavy hand when it comes to the economic environment.
Basu says that piracy in the Red Sea as well as the resulting ship-diversions from the Suez Canal around the Cape of Good Hope have gone on to cause worldwide freight rates to almost double in the first two weeks of this year, as per the Freightos Baltic Index. All else equal, the surging shipping costs are going to put upward pressure when it comes to specific inputs.
Nonetheless, builders are actually seeing some relief on the ground, with the costs dropping for road builders and the backlog growing in December.