US commercial construction demand to remain strong ‘for foreseeable future’

By Neil Gerrard05 April 2023

Crane and skyscrapers under construction in San Jose, South San Francisco bay area Crane and skyscrapers under construction in San Jose, South San Francisco bay area Image: Sundry Photography via AdobeStock -

Total construction spending in the US declined by 0.1% in February, as demand for data centres and manufacturing plants offset weaker single-family homebuilding and public construction.

Associated General Contractors of America (AGC) analysis of federal data found that demand for many types of commercial construction is likely to remain strong “for the foreseeable future”.

Construction spending, not adjusted for inflation, totalled $1.84 trillion at a seasonally adjusted annual rate in February, 0.1% below the January rate.

Spending on private residential construction decreased for the ninth consecutive month in February, by 0.6%. Spending on private non-residential construction increased by 0.7% in February, while public construction investment dipped by 0.2%.

Spending varied among large private non-residential segments. The biggest component, manufacturing plants, jumped 2.7%. Power construction and private office construction, including data centres, climbed by 1.5% and 0.5% respectively. But commercial construction—comprising warehouse, retail, and farm construction—decreased 0.6% in February.

In the public categories, highway and street construction increased 0.3%, while education construction slumped 0.9%. Public spending on transportation projects fell 0.7%.

Public residential spending dropped due to a 1.8% contraction from January in single-family homebuilding. That outweighed an increase of 1.4%in multifamily construction.

Ken Simonson, the association’s chief economist said, “Continued strong demand for manufacturing plants and data centres, along with an increase in power projects, contributed to the increase in private non-residential construction.

“Those segments appear likely to keep growing for many months to come.”

But association officials said many projects were being held up by a lack of clear guidance about new regulatory measures associated with much of the new federal investments in construction.

That included Confusion about the administration’s approach to Buy America rules, labour measures associated with the new semiconductor funding and registered apprenticeship mandates for the new green energy investments, which it said were either unclear or unfinished.

AGC chief executive Stephen E. Sandherr said, “The president and his team appear far more focused on interpreting laws to fit their agenda instead of progress when it comes to the billions in new federal investments Congress has authorized.

“Instead of adding miles of new red tape, the administration should be working with the construction industry to find ways to get construction started as quickly as possible.”

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