2015 Construction Industry Outlook
As painting professionals, the vitality of the construction industry plays an important role in maintaining and growing your business. We are a quarter into the new year, which presents an optimal time to take a look at where we've been and — more important — where we are going. The good news is that the outlook is positive, with steady growth across a number of sectors, from new construction in the residential and commercial areas, to a greater number of first-time homebuyers re-entering the picture, to a jump-start in the remodeling market. Here's the breakdown.
A Look in the Rear View Mirror
Before we look forward, it's important to take a look at last year. In 2014, residential, commercial and institutional construction projects enjoyed some of the modest gains that were predicted by experts.
Meanwhile, new residential housing construction reported overall good growth on a national level, but there were still lagging markets where construction trends remain cautionary. In addition, as a more stable housing market, lower unemployment and consumer spending began creating demand, retail and office building construction also saw stronger growth in 2014.
So What's in Store for 2015?
At this point, 2015 looks to be another year of continued steady growth and industry professionals appear to agree with the trend. But it's important to note that most are cautious about post-recessionary growth trends, as they are concerned about the "valleys" (i.e., "cliffs") that occur after very strong growth periods that lead to unsustainable "peaks."
In addition, there are a few trends worth noting.
- Housing construction markets continue to show steady growth
- Commercial building trends appear to be gaining more steam
- Remodeling markets are driving growth across all home improvement categories
First-time Homebuyers May Enter the Market Again
For quite a few years now, first-time or entry-level homeowners have been largely absent in the market but it appears that's about to change, as lower unemployment rates and improving wages are giving first-time homebuyers greater confidence. In addition, while mortgage lending practices are still restrictive, financial institutions are evaluating buyer qualifications, which could increase home purchases. During the next five years, homebuilders anticipate more consistent growth as the property market continues to recover, while the next two years may provide strong results as low interest rates, rising confidence and higher corporate profits result in more consumers purchasing homes and greater investment from property developers.
Commercial Building Investment is Catching Up with Demand
When it comes to construction, commercial building typically lags the overall economy by one to two years. Yet, as the economy has recovered more during the last three to five years, corporate profits have improved, and a healthier and stronger business sector is better positioned to invest in new construction spending to meet consumer demand. These investments are finally working through the pipeline and more building activity is occurring in retail, office, warehouse and other commercial building space.
In addition, the government sector shows growth with various institutional projects such as government offices, infrastructure and school projects. Investments from the 2009 American Recovery and Reinvestment Act are clearly visible and, because contracts for municipals construction projects span several years, these types of projects will continue to keep contractors busy. Municipal building sectors are also expected to benefit from the Patient Protection and Affordable Care Act, as more insured Americans will demand more and improved healthcare facilities.
Improving Disposable Income Kick-starts the Remodeling Market
Thanks to improved employment and higher disposable income levels, the remodeling market has been on the rebound. This is because consumers have more confidence to start and invest in the remodeling projects they have postponed for the past few years, and favorable mortgage rates and slowly rising home prices have supported consumers' ability to finance remodeling projects. In addition, continued rising home prices will fund improvement projects and increase demand for industry services such as professional painting.
In the end, the outlook for this year's construction industry is cautiously optimistic, with a growing number of opportunities for painting professionals to increase business across the residential, commercial and remodeling markets. We wish everyone a successful and profitable year!
"Sturdy rebound: Revenue will increase thanks to stabilizing government investment," IBISWorld Industry Report 23622b — Municipal Building Construction in the US, Darryle Ulama, November 2014
"Moving up: Rising consumer sentiment and household construction will boost demand," IBISWorld Industry Report 23611a — Home Builders in the US, Jeremy Edwards, December 2014
"Reconstruction era: Demand will recover as vacancy rates fall and corporate profit returns," IBISWorld Industry Report 23622a — Commercial Building Construction in the US, Omar Khedr, December 2014
"Touched up: Housing market growth will provide a boost to industry demand," IBISWorld Industry Report 23611d — Remodeling in the US, Omar Khedr, January 2015