JLL Predicts 2024 Spending on Construction Projects Will Be
Higher Than 2023
By Andy Peters
CoStar News
July 17, 2024 | 2:45 P.M.
Spending on large U.S. commercial construction projects should rise
slightly through the rest of 2024 as certain building materials become
more affordable and contractors cut prices to replenish depleted
project pipelines.
Construction spending is expected to rise 5.5% from last year to $2.13
trillion in 2024, according to the JLL 2024 Midyear Construction
Update issued on Tuesday. JLL had earlier forecasted total
construction spending to be flat for 2024 but revised the estimate
upward based on its indicators for building materials and general
contractors’ bidding patterns.
Prices for insulation, concrete, bricks, doors and windows are still
rising but at a slower pace in 2024 compared to last year, according to
JLL. The cost of metal building materials is falling with an estimated
2.5% decline in 2024 compared to last year.
The U.S. Department of Transportation
awarded a $1.5 billion grant to a project
to replace the Interstate 5 bridge that
connects Portland, Oregon, and
Vancouver, Washington. (Oregon Public
Broadcasting)
Additionally, many general
contractors have burned through
project backlogs and are now
seeking to refill those empty
coffers, said Julie Hyson, executive
director of portfolio clients,
services and industries at JLL.
That’s led to contractors slicing
their asking prices.
“There’s a fire in the belly of contractors that wasn’t there one or two
years ago,” Hyson told CoStar News. “Constructors are more mindful
of the need to build backlogs.”
In terms of project types, much of the growth is coming from the
construction of data centers, semiconductor manufacturing plants,
hospitals and sustainability initiatives, JLL said. But the growth in
those areas is offset by slowdowns in office construction and other
property types.
Large projects, sometimes reaching multibillion-dollar contract
awards, are fueling much of construction firms’ growth. That includes
Fluor winning a contract during the second quarter to provide
engineering, procurement and construction management services to
Eli Lilly for its $9.3 billion manufacturing plant near Indianapolis,
according to the Irving, Texas-based company.
Main Drivers
The federal Infrastructure Investment and Jobs Act and other federal
programs are also driving large construction projects. The U.S.
Department of Transportation this month awarded a $1.5 billion grant
to the states of Oregon and Washington to replace the Interstate 5
bridge spanning the Columbia River between Portland, Oregon, and
Vancouver, Washington. Additionally, Amtrak awarded a $637 million
construction contract to Skanska and a development partner to
rehabilitate the East River Tunnel in New York City.
Developers also continue to hire contractors for small and mediumsized commercial projects. Meta last week hired Portland, Oregonbased contractor Fortis Construction to build an $800 million data
center in Cheyenne, Wyoming. Henry Ford Health last month hired a
team led by Omaha, Nebraska-based contractor Kiewit to design, build
and operate a $235 million heating and cooling facility for the Henry
Ford Hospital in Detroit.
Emcor Group, a Norwalk, Connecticut-based construction company,
has seen an increase in work on cold storage warehouses, CEO
Anthony Guzzi said during an April conference call.
Cold storage properties “are smaller in dollar awards but require
actually higher skills to do them, especially some of the refrigerant
work and fire safety,” Guzzi said. Guzzi did not identify clients nor
locations for its cold storage projects.
Other developers are betting that the Fed will cut rates within the next
12 months, according to JLL.
Some developers “who were holding out for better interest rates have
started to move on projects,” JLL said in the report.
Recent economic indicators add “somewhat to confidence” that the
Federal Reserve’s higher interest rates are working to cut inflation,
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