Page 8 - ProInstallerJanuary-February 2022
P. 8

Market Study:

        2021-2022 U.S. Construction, Current

        and Future Outlook

        By Daniel LoBue, Tego Systems Corp.

             ince our last article (July/August 2021 ProInstaller),   As the COVID-19 pandemic approaches the endemic
             we all have witnessed construction markets grow   phase, we see more permanent trends regarding a hybrid
        Ssignificantly because of very low interest rates.   work environment, with people working from home several
        In addition, severe supply chain issues, all-time high   days a week, video conferencing rather than actual travel
        shipping costs, ever-rising material costs, shortages of   and the shift to Airbnb-style vacations. Society has fully
        inventory stemming from the great recession and ongoing   adjusted to these changes; we believe the narrative for a
        strong demand have and will continue to deliver strong   very strong residential market remains intact, and demand
        construction activity.                              will continue at robust levels for several years to come.

        Residential Housing Construction                    Multifamily permits have remained strong as well, having
        We are on track for a 4% increase year-over-year from   grown from 437,000 to 528,000—a net increase of 21%.
        2020 in single-family housing completions at an annual   And, with the shortage of housing inventory, we see this to
        rate of 1.282 million units (final revised Sept. data). Total   continue strong into 2022.
        construction spending in residential housing has risen to
        $778.60 billion which represents an increase of 27% due   Commercial Construction
        in part to the very high construction inflation. The Case   After adjusting for construction inflation on an annualized
        Shiller Report published FRED states that house prices   basis, commercial construction is still trending downward
        at the end of September 2021 were 24.5 % higher than in   compared to 2020. It has only grown by 1% in total
        September 2020.  Deducting 7% for an average property   construction spending from $464 billion in 2020 to $469
        appreciation of 7% puts the actual construction inflation at   billion in 2021. With 17.5% construction inflation, this sector
        17.5%.                                              is still 15-18% below 2019 levels. We do expect some
                                                            improvement for 2022 but our previous assumptions still
        Residential housing permits have risen to 1,650 million—an   remain in place. We made our case through the pandemic
        increase of 12% compared to 2020. Permits have also lost a   that the reduced demand for office, retail and hospitality
        little steam since earlier in the year as construction enters   space will persist, while industrial space will steadily grow
        a slower cycle during the winter months.            as consumers continue to shift to online from in-store
                    Housing Completions, Needed Housing vs. Shortage
                                         in 1000 Units                                 Public Construction
                                                                                       Public construction after
                                                                                       adjusting for inflation,
                                                                                       despite a 2% nominal
          4000                                                                         growth, remains flat over
                                                                                       last year at $339 billion.
          3500                                                                         With the recently passed
                                                                                       infrastructure bill, we
          3000                                                                         expect spending over
                                                                                       the next five years of
          2500                                                                         $550 billion will increase
                                                                                       Inflation, Price Increases
          1500                                                                         & Supply Chain Issues

          1000                                                                         The Federal Reserve has  Charts By Daniel LoBue, Tego Systems Corp.
                                                                                       now officially moved away
            500                                                                        from the terminology
                                                                                       of “transitory” inflation
              0                                                                        and the official number
                           Completed           Needed              Shortage            has increased to 6.80%.
                                                                                       Even though the Federal

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