Planning for 2016: Factor in Growth for the Floor Covering Industry

This is a summary of key points from Kermit Baker’s Beyond the numbers article in Floor Covering Weekly – July 15, 2015:

The construction recovery continues to unfold at a frustratingly slow pace.  Homebuilding saw housing starts nationally drop from 2.1 million starts in 2005 to just over a half million in 2009, and back to a million nationally as of the end of last year.

Nonresidential building construction hasn’t even recovered this much.  National construction spending reached a half trillion dollars in 2008, it fell by a third in 2011, and has not gotten back to $400 million by the end of last year.

Construction activity so far in 2015 has continued to be volatile.  Housing starts are running at just a 1.05 million pace through the first several months of the year, but recent numbers are suggesting that homebuilding activity may be beginning to accelerate.

The recent upturn in construction activity is expected to produce a stronger second half of this year, with the momentum continuing into 2016.  This comes from not only national employment figures and overall economic  activity, but there is a rise in construction project activity.  American Institute of Architects (AIA) indicate that design activity has seen a strong growth over the past 18 months.  The Architectural Billings Index for June showed the strongest monthly increase in design activity of the past eight years.   Design activity leads construction activity by 9 to 12 months on average.

The AIA’s Consensus Construction Forecast panel 2015 mid-year update stated that project spending is to increase almost 9 percent this year, and another 8 percent in 2016.  Spending on offices is projected to be up 15 percent this year, hotels up 13 percent, and retail facilities 10 percent.  Spending on construction of institutional facilities is projected to double to almost 6 percent next year.

Driving the growth in in construction of institutional facilities is health care and education.  The aging of our population and ongoing implementation of the Affordable Care Act is generating strong demand for health care facilities.   Growing enrollments are generating more demand for educational space.

2016 is expected to be a good year for construction activity.  Homebuilding activity should grow by about 15 percent, commercial/industrial building spending by 10 percent, and institutional building spending by almost 6 per cent.  2016 is poised to be the best year for construction in almost a decade,  which will provide opportunities across a wider choice of floor covering materials and price points.

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