Q3 2024 Economic Indicators
Architecture Firm Billings and Reconstruction Trends: A significant portion of architecture firms report steady or increased work on reconstruction projects, focusing on modernization, adaptive reuse, and upgrades in building systems. However, challenges loom as billings have declined for 12 straight months, including securing agreements for larger projects, partly due to high interest rates.
ABC Construction Backlog and Confidence: The Construction Backlog Indicator showed a slight increase in September 2024, reflecting moderate confidence in future sales and profit margins despite economic headwinds. Contractors are optimistic about the easing of interest rates and material costs.
Dodge Momentum Index: The index, a leading indicator of nonresidential construction, declined by 4.2% in September due to a slowdown in data center projects, though institutional projects in education and healthcare saw growth. The index remains high, driven by institutional, education, healthcare, and recreational projects entering the planning queue.
Sector-Specific Forecasts:
- Nonresidential Construction: Expected to slow, with key drivers including economic factors like high office vacancy rates and reduced warehouse construction.
- Healthcare and Education: Stable investment levels are anticipated, with growth expected in late 2025. Education sector growth is projected due to bond measures and continued support for higher-education projects.
- Residential: Multifamily residential construction is forecasted to decline due to inventory surpluses and stable rental rates, while single-family residential shows signs of recovery.
- Manufacturing: Federal funding initiatives are expected to fuel a significant increase in construction investment in semiconductors, electric vehicles, and biomanufacturing sectors. However, talent shortages and supply chain issues pose challenges.
Outlook: The construction industry expects moderate growth through 2024, with slower expansion in sectors sensitive to interest rates. Anticipated federal rate cuts in 2025 may stimulate new projects, particularly in public safety, manufacturing, and amusement/recreation. Our report reflects a cautiously optimistic outlook, tempered by ongoing challenges related to high interest rates, supply chain constraints, and sector-specific issues like high office vacancies and the multifamily housing slowdown.