Understanding technology’s role in an uncertain construction economy

Construction growth remains sluggish; for architects, embracing technology’s role in the numbers, as well as in design, can make a difference

The economy continues to be strong overall, yet construction continues the two-steps-forward-one-step-back momentum it has seen for most of the recovery.

According to the latest data analyzed by ConstructConnect, the overall economy weakened in the first quarter of 2018, but economic fundamentals remain robust, with GDP still forecast to grow by 2.8 percent. Business investment is likely to strengthen this year, underpinned by a strong external environment and significant reductions in corporate taxes. The outlook for households is also solid, driven by fiscal stimulus, rising wages, low unemployment, and high consumer confidence. Inflation is also expected to creep up, and as a result, we expect four interest rate rises through the course of the year.

And yet the construction sector continues to be inconsistent. “It should be a time when construction will start to pick up,” says Alex Carrick, chief economist for ConstructConnect. “Construction has been slow to recover after the downturn of 2009.”

Indeed, total US construction starts are forecast to grow by just 0.4 percent in 2018. The biggest shortfall is in the nonresidential building sector, which is forecast to decline by 6.1 percent this year. Residential starts are forecast to grow by 2.7 percent, although it masks sharp forecast declines in the multifamily segment. Civil engineering starts are the positive offset, with growth forecast at 8.9 percent. Over the medium-term, US construction remains primarily driven by the residential sector as pent-up demand for US housing powers new homebuilding. (Note: ConstructConnect collects and publishes out-front “starts” or groundbreaking information. The Census Bureau provides put-in-place numbers, which are equivalent to progress or work-in-process payments.)

“Architects have to understand that the marketplace is different. Now it’s half market volume forecast and the other half is understanding all the changes that are demanded in terms of technology.” - Alex Carrick, chief economist for ConstructConnect

For architects navigating this unique landscape, one area to pay attention to is how technology is shaping construction demand. For example, there was a time when 15-venue stadium-style movie theaters were going up everywhere—but now demand is less as potential customers find more entertainment options via streaming services and their phones. Hospitals are being impacted by the increasing use of wearables and online diagnoses. Banks and tellers, once on every corner, are less and less needed as electronic money management proliferates. Office space is changing as more people work from home. And, of course, retail has shifted away from malls and traditional brick and mortar to online shopping.

That doesn’t mean it’s going away entirely, but we do need to adapt and evolve: While traditional malls are going away, airports have become shopping meccas. Offices have shifted to open floor plans and flexible work spaces that accommodate both more collaborative environments and workers who may be there only once or twice a week. Shopping has gone online—but in its place are massive distribution centers to support the fulfillment needs of companies like Amazon. And all that technology requires another form of facility: data centers.

“Architects have to understand that the marketplace is different,” Carrick says. “It used to be that thinking of the future meant looking at the size of the market—size, volume, etc. But now it’s half market volume forecast and the other half is understanding all the changes that are demanded in terms of technology.”

And while technology has been influencing product specification for years, from high-efficiency HVAC to camera-based security systems, its influence has spread to nearly every area of the building or even how the structure is built. Modular construction, while still a small percentage of the construction market here, is flourishing in other parts of the world, as are robotic technologies like bricklaying and even 3D printing. Knowledge of those areas will be crucial for designers in the US in the coming decades.

Navigating the economic landscape requires architects to be conscious of how technology is shifting the market, Carrick says. “Architects are out in front. Being aware of all these product changes plays a crucial role.”

To get more insights into the latest construction market numbers, download ConstructConnect’s Q2 2018 Forecast Report.

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