Value of private nonresidential construction

The value of nonresidential construction is influenced by several factors, including economic conditions, interest rates and government policies. Strong economic growth typically encourages investment in commercial spaces, boosting demand. Fluctuating interest rates affect financing costs, impacting developers' decisions. Regulatory frameworks, such as zoning laws and environmental regulations, also play a pivotal role. Additionally, technological advancements can drive construction efficiency, while market trends dictate the types of spaces in demand. Lastly, labor costs and material prices can significantly influence project feasibility and profitability.

The value of nonresidential construction has increased, with declines early in the period being fully offset by growth later in the period. The early declines were driven by reduced private investments in new projects amid the pandemic-induced health crisis and economic uncertainty. These declines were partly offset by higher healthcare facilities construction, which became essential during the pandemic. Growth later in the period was driven by historically low interest rates, encouraging businesses to take advantage of low financing costs, as well as the impact of the CARES Act of 2020 and the American Rescue Plan Act of 2021 totaling over $4 trillion in stimulus money for individuals and businesses. This growth, however, was partly offset by lower activity in the offices segment as many office workers have transitioned to remote work. Furthermore, with interest rates climbing to historically high levels, growth in nonresidential construction has dropped from low-double digit level to mid-single digit growth in 2024.

Growth in nonresidential construction is expected to slow down from the levels seen in 2024, driven by lower warehouse and healthcare construction. Spending in the commercial market is expected to rise, driven by higher demand for new data centers as well as an uptick in demand for offices as more employees are expected to return to in-office settings. Despite continues growth in -e-commerce sales, warehouse construction is expected to be flat-to-negative, as the warehouse construction has become overbuilt in recent years. Health care and education construction, which are less subject to volatility, are poised for healthy but unspectacular growth.