Business

Quarterly U.S. Put-in-Place Forecast Report, Fall 2021

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3 years ago

September 27, 2021

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Two of the major themes that will be governing U.S. construction activity as the coronavirus-caused downturn recedes into legend will be electrification and decarbonization. In most ways, they are two sides of the same coin, with the former seen by many in public governance, with environmental think tanks, and even among the general populace, as the best way to achieve the latter.

Winter 2020-21 Review of U.S. Put-in-Place Construction Outlook Graphic

Spearheaded by the auto sector’s commitment to greatly expand EV production, a pronounced shift to more electric power usage and near zero-emitting carbon sources, such as wind and solar, will boost demand for nickel in batteries and copper in distribution and transmission lines. Many other resources are also experiencing a rebirth in demand and prices, after lying dormant for the previous dozen years.

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With commodity prices moving higher in the background, inflation is threatening to become more entrenched than is desirable. Another likely underlying theme for the economy and construction markets in the years ahead is a framework of rising costs.

Some of the shortages along supply lines that are occurring now, and contributing to price increases, are likely to prove temporary (e.g., exorbitant shipping charges for imports from overseas and costly delays for the offloading of cargo at ports). But there are additional inflationary factors waiting in the wings.

Bureau of Labor Statistics figures on year-over-year hourly and weekly wages are climbing at least twice as fast as normal, approaching +5.0%. The massive debt taken on by government to provide business and personal income support in much of 2020 and 2021 will almost certainly lead to tax increases. Nor will interest rates be remaining on the mat forever.

Also, worthy as they are as goals, it would be hard to argue that electrification and de-carbonization won’t be expensive. To be effective, many more homeowners will need to switch to solar paneling, a full range of electric appliances, and backup power storage batteries. Heavy industry, including steel, cement, and aluminum producers are proceeding with new expenditures on innovative production processes and scrubbing systems to restrain carbon emissions.

Finally, three other trends warrant mention. Currently, high-speed residential construction will be handing the baton on to certain recovering segments of nonresidential activity by the mid-point of next year. Working to ensure this transition, especially in the engineering sphere, will be the heightened emphasis put on infrastructure undertakings. And as a final observation, recent events have moved high-rise office and multi-use complexes off center stage in favor of low-rise warehouse and data center structures.

‘Starts’ versus Put-in-place (PIP) Statistics

‘Starts’ compile the total estimated dollar value of all projects on which ground is broken in any given month. By way of contrast, put-in-place capital spending statistics are analogous to work-in-progress payments as the building of structures proceeds to completion.

Consider a $60 million office tower for which ground is broken in June 2021. For the ‘starts’ series, the entire estimated value ($60 million) will be entered in June 2021. In PIP numbers, it will be captured as spending of approximately $15 million in 2021; $25 million in 2022; and the final $20 million in 2023.

Table 1: U.S. Construction Spending (put-in-place investment)
(billions of “current” $s)

	Actuals		Forecasts
Type of Construction:	2019	2020	2021	2022	2023	2024	2025

Grand Total	1391.1	1469.2	1,565.9	1,673.8	1,812.0	1,913.9	1,990.4
(year vs previous year)	4.3%	5.6%	6.6%	6.9%	8.3%	5.6%	4.0%
Total Residential	553.4	638.1	768.7	831.0	899.4	949.9	987.4
	-1.9%	15.3%	20.5%	8.1%	8.2%	5.6%	3.9%
Total Non-residential	837.6	831.1	797.2	842.8	912.6	964.0	1003.0
	8.9%	-0.8%	-4.1%	5.7%	8.3%	5.6%	4.0%
Total Commercial/for Lease	206.5	203.3	189.1	189.4	202.5	215.2	223.9
	6.2%	-1.6%	-6.9%	0.1%	6.9%	6.3%	4.0%
Lodging	33.5	29.1	20.6	19.1	21.7	23.9	25.7
	6.3%	-13.2%	-29.2%	-7.2%	13.8%	10.1%	7.3%
Office	88.7	87.4	81.1	77.0	76.8	79.6	82.2
	15.7%	-1.5%	-7.2%	-5.0%	-0.3%	3.7%	3.3%
Commercial (retail/warehouse)	84.3	86.8	87.5	93.2	104.0	111.7	116.0
	-2.4%	2.9%	0.8%	6.6%	11.5%	7.4%	3.8%
Total Institutional	201.4	204.5	186.7	190.6	202.8	210.6	215.6
	8.5%	1.5%	-8.7%	2.1%	6.4%	3.9%	2.4%
Health Care	46.3	48.1	48.4	49.4	52.9	55.5	57.0
	6.5%	4.0%	0.7%	2.0%	7.1%	4.9%	2.7%
Educational	109.0	107.4	97.2	97.1	103.6	106.9	108.7
	7.6%	-1.4%	-9.5%	-0.1%	6.7%	3.1%	1.7%
Religious	3.7	3.5	3.2	3.1	3.0	3.0	3.1
	6.5%	-6.2%	-9.1%	-2.3%	-3.2%	-0.2%	2.8%
Public Safety	12.0	17.9	12.7	13.8	15.2	15.7	15.8
	28.5%	48.8%	-29.2%	9.2%	10.1%	3.4%	0.1%
Amusement and Recreation	30.4	27.6	25.2	27.2	28.0	29.5	31.1
	8.4%	-9.4%	-8.7%	8.0%	3.1%	5.4%	5.2%
Total Engineering/Civil	348.7	351.2	347.4	382.5	417.7	442.5	462.8
(year vs previous year)	10.1%	0.7%	-1.1%	10.1%	9.2%	5.9%	4.6%
Transportation	57.5	59.7	57.6	63.2	70.9	75.9	79.0
	7.9%	3.9%	-3.5%	9.7%	12.3%	7.0%	4.1%
Communication	22.2	22.5	21.8	22.1	23.5	25.1	26.6
	-9.4%	1.5%	-3.0%	1.3%	6.3%	6.5%	6.2%
Power	118.0	115.0	117.2	132.7	142.5	148.8	155.6
	18.5%	-2.5%	1.8%	13.2%	7.4%	4.4%	4.6%
Highway and Street	99.4	99.9	96.8	102.8	110.6	118.3	124.4
	8.3%	0.5%	-3.1%	6.2%	7.5%	6.9%	5.2%
Sewage/Waste Disposal & Water Supply	42.5	45.1	46.3	52.6	59.3	62.5	64.9
	7.9%	6.1%	2.5%	13.7%	12.7%	5.5%	3.8%
Conservation and Development	9.2	9.0	7.7	9.2	10.9	12.0	12.3
	11.9%	-2.8%	-14.0%	19.1%	18.8%	9.8%	3.0%
Total Industrial/Manufacturing	81.0	72.1	74.0	80.2	89.6	95.7	100.8
	11.7%	-10.9%	2.6%	8.4%	11.7%	6.7%	5.3%

“Current” means not adjusted for inflation.

Source of actuals: U.S. Census Bureau / Forecasts: Oxford Economics and ConstructConnect.
Table: ConstructConnect.

Graph 1: U.S. Grand Total Construction Spending
Put-in-place (PIP) Investment