FMI Forecasts Steady Growth in Construction

RALEIGH, N.C., Oct. 19, 2016 — (PRNewswire) —

RALEIGH, N.C., Oct. 19, 2016 /PRNewswire-iReach/ -- FMI's forecast for the third quarter shows somewhat slower growth for some sectors, but, for most sectors, continues our forecast for the first two quarters of the year. So what do we see now for future growth? Continued slow growth doesn't mean no growth. The billions of dollars in construction growth tend to add up. Even though there are no signs that GDP will break out of its upish slump, the economy is still adding jobs, buying homes and spending money on consumer and durable goods, but not as much as before the recession, or enough to boost the Consumer Price Index. It is surprising that there are few, if any, signs of inflation in a growing economy. The Federal Reserve has achieved most of its goals, but can't seem to find a good time to raise interest rates even a little bit. No one wants to be responsible for pulling the plug on a thriving economy.

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The largest growth markets are lodging (14%), office (11%), commercial (8%) and educational construction (6%). With the exception of commercial construction, all are strong markets but growing slower than in 2015. Together, these four markets represent 52.1% of CPIP for 2016. Growth expectations in these markets were supported by FMI's Second Quarter Nonresidential Construction Index report. Construction executives answering the NRCI survey increased their optimism to drive the total NRCI Index score from 55.6 in the first quarter to 61.3 in the second quarter.

Forecasts for some key sectors:

Manufacturing – Manufacturing construction took a heavy hit during the Great Recession, but it has more than caught up as of 2015 with a whopping growth of 33% for the year and a more modest 2% growth expected for 2016. Continued low energy prices will hold down capacity additions in the oil and gas sector, but help those relocating or expanding in other areas of manufacturing, including the current boom in the petrochemical areas.

Commercial—The solid growth rate of 6% for commercial construction in 2015 will continue through 2016 before dropping to 4% and lower through 2020. Some of the fastest-growing areas in commercial retail construction have been drinking places and food services; however, building materials and garden supply stores are currently experiencing the highest growth rate. While many national chain stores continue to close properties and downsize new stores, new startup businesses are taking off in major metro areas. Disruption in traditional commercial construction is occurring not only for online shopping but also in the form of boutique startups and the future of smart stores both online and stick-built. Growth in non-store sales is also driving growth in warehouse space and data centers .

Health Care—Health care construction is making a steady recovery. FMI is forecasting $41.0 billion in construction put in place for 2016 and 5% growth in 2017. Traditional large hospital projects are returning to the drawing boards with fewer large hospital projects in the works. The bulk of the work will be renovation and additions as well as outpatient care. New facility designs are upping the game for a patient-centered environment as well as reducing concerns for the spread of supergerms. Construction will continue to become more collaborative and integrated with the various communities involved.

About FMI

For over 60 years, FMI has been the leading management consulting and investment banking firm dedicated exclusively to engineering and construction, infrastructure, and the built environment.

FMI serves all sectors of the engineering and construction, infrastructure and built environment industries as a trusted advisor. More than six decades of industry context, connections, and leading insights leads to transformational outcomes for our clients and the industry.

FMI helps you build your foundation for tomorrow and optimize your business for today. Industry Focus. Powerful Results.

Sector Expertise

• A/E and Environmental
• General Contractors/CM
• Heavy Civil
• Industrial
• Specialty Trades
• Utility T&D
• Clean Tech and Energy Services
• Construction Materials
• Building Products
• Oil and Gas
• Private Equity
• Owners

For more information, please visit http://www.fminet.com.  Follow FMI on Twitter and LinkedIn.

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SOURCE FMI Corporation