The Winter 2018 edition of the Electronic Systems Outlook report is now available! Looking ahead to the rest of 2019, we forecast a 3% increase in total construction spending over 2018.
Primary growth segments this year are expected to include corporate offices, education, government, and lodging. All of these markets have forecasted growth rates of 5% or more. Most other segments are likely to grow (roughly with the rate of inflation) and therefore be considered stable. The houses of worship market is the only segment expected to decline in 2019.
Summarized from the report, we’ve identified trends in each market that are impacting construction (positively and negatively):
CORPORATE
- Large projects are planned by Amazon, Apple, Google, and other corporate giants
- Urban office construction activity has been stable through the end of 2018
- Suburban and rural area project activity has progressively slowed
- Increasing lease costs and the growing trend of hoteling and remote work flexibility are contributing to slowing traditional office investment
- Data center investment growth continues to be strong
EDUCATION
- Educational enrollments are expected to grow at an increasing rate over the forecast period
- Endowments continue to increase despite implications from the 2017 tax restructure
- Tuition revenue growth in private schools is expected to nearly double the revenue growth seen at public institutions
- K-12 modernization projects are found to offer the greatest impact on a student’s ability to learn and the faculty’s ability to teach
GOVERNMENT
- States and municipal governments are experiencing growing revenues and increasing construction budgets
- Growth is led by expanding metropolitans that require additional emergency and correctional resources
- Continued fiscal constraints, tied to ever-increasing pension and Medicaid needs, continue to weigh heavily on capital programs
HEALTHCARE
- Demographic shifts indicate a need for more medical office space, and increased modular construction within healthcare is anticipated as a means to streamline projects and reduce project costs
- Telehealth, wearable health technologies, and artificial intelligence are considered technological breakthroughs in the industry, each potentially tempering growing demand for healthcare facilities
- Data management and cybersecurity are increasing concerns within the industry
HOUSES OF WORSHIP
- Declining attendance frequency, especially among active members, is the predominant driver of declining construction investment
- Design trends continue to favor smaller, multi-site local facilities over larger, single-site alternatives
- Very few large-scale, single-site projects are expected over the forecast period
- Facilities are increasingly designed with more gathering spaces and family appeal (e.g., cafés and play areas)
LODGING
- Momentum in 2018 is due to persistent economic expansion, which has boosted corporate earnings, business and leisure travel, and investments in amusement and convention center spending
- Occupancy rates are near the strongest point within the past decade
- Rising construction costs and large projects coming online will have an adverse impact on owners’ continued willingness to expand in 2019
MANUFACTURING
- 2017’s tax reform is expected to continue fueling a rise in manufacturing plant investment
- Tariffs on Chinese imports, as well as retaliatory tariffs on U.S. goods, continue to generate uncertainty
- Increased volatility in manufacturing construction is expected if the Trump administration maintains the use of tariffs as a strategic initiative
RETAIL
- The shift from brick-and-mortar space to e-commerce has significantly augmented the capital investment focus of large retailers
- Storefront infrastructure, including shopping centers and malls, will continue to moderate through 2019
- Investment in warehouse and distribution logistics centers will continue to expand
Download the report at no cost to find out what these trends indicate for short- and long-term construction. The report is available to all members! (If you’re a non-member who wants a copy, contact us.)
And don’t forget to sign up for the free one-hour webinar on Feb. 19, 2019, to learn more about the Electronic Systems Outlook Winter 2018 data and how it can be used to focus your sales efforts and improve business.