NEW YORK—The coming year is expected to be a stable one for the overall construction industry, but with little growth and with key stats like construction volume and employment holding steady, according to the “2020 Construction Outlook” from JLL.
“We are forecasting an overall steady year for the construction industry in 2020, with a healthy backlog and high levels of ongoing work expected to keep contractors across the country busy,” Henry D’Esposito, construction research lead, Americas, JLL, told Hotel Business. “Private spending on construction projects stalled over the course of 2019, and we expect public spending to be the primary force behind any growth in the industry in 2020.”
Total nonresidential construction spending is forecast to remain level, with growth under 2%. However, the risks and volatility that increased below the surface in 2019 will remain a factor in 2020. The overall demand picture is expected to weaken modestly over the course of the year, which will be a continuation of trends seen over the past few years.
The outbreak of COVID-19 has cast a shadow over 2020. “The coronavirus has created major uncertainty for construction, particularly in how it may impact construction material costs over the course of 2020,” he said. “We are tracking two possible dynamics. The first is how any slowdown in the production of construction materials in areas impacted by the virus may result in shortages in the U.S., which could lead to increased price escalation. The second is whether any slowdowns in construction activity as a result of efforts by governments or companies to contain the spread of the virus may reduce demand for materials, which could lead to temporarily lower prices.”
In 2019, the U.S. economic cycle officially crossed into new territory when it became the longest period of economic expansion in the postwar era, according to the report.
Although the auspicious expectations and high growth of the early post-recession years may have passed, the construction industry recorded another stable year. The industry still grew in 2019, but slowed down in line with JLL’s forecast when compared to 2018 and prior years.
Construction cost growth was moderate on the national level in 2019, as both construction wages and construction material costs increased on average between 2-3%. The year ended without any major shocks to material or labor prices, and changes in trade policy were minor compared to 2017 and 2018, with a growing possibility of tariff de-escalation.
While the overall industry was steady in 2019, those steady industry-wide numbers masked warning signs of weaknesses within specific segments, sectors and geographies. At the same time, signs of volatility emerged as some industry indicators moved up and down dramatically over the course of the year, and a key construction confidence indicator dropped to an eight-year low. Adding to the volatility, private construction spending declined 1.2%, only the second full-year decline since the end of the recession, while public spending rocketed up 10.1%.