While the slowdown in housing has gained the most headlines the last couple of years, housing beyond the near future still looks promising. Even more will be spent on commercial and public works construction, combined, over the next four decades.
It's possible for the typical single-family home to last 170 years, much longer than retail, schools, and warehouses. That's because commercial projects are build for “investment horizons,” so they must be torn down and rebuilt much more frequently than homes, said Arthur C. Nelson, director of the Metropolitan Institute and professor of Urban Affairs and Planning at Virginia Tech. He spoke at the National Ready Mixed Concrete Association's Fall Conference and Expo in October in Phoenix.
“Residential development is more durable than commercial development,” so commercial projects must be rebuilt more often, said Nelson. “These are not durable stocks. This is where the real game is going to be played.”
Of the 115 billion square feet in nonresidential development from 2000 to 2040, only 30 billion square feet will be built to accommodate new growth. The remaining 85 billion square feet will be for replacement.
In all, new construction in the U.S. between 2000 and 2040 will total $50 trillion, he said. Of this, $22 trillion will be residential, $20 trillion commercial, and $8 trillion infrastructure/public works. “Two-thirds of everything you will see did not exist in 2000,” he said.
Not surprisingly, the South and West regions will lead the country in all types of construction, followed by the Midwest and Northeast. From 2000 to 2030, the South will account for 56% of new construction, the West 29%, the Midwest 8%, and the Northeast 7%.
Nelson also forecasts 2 million new homes will be built annually from 2000 to 2040, for a total of 80 million. Of these, 45 million new homes will be construction to accommodate the nation's growing population; 35 million will be replacement units.
Two lifestyle changes many were touting a few years ago haven't come to fruition, leading to more commercial construction than some anticipated. Internet retailing grew 90% in 2000, but was up only 10% in 2006. People like to visit shopping malls and stores, after all. Also, 3% of the population telecommuted in 1990; this grew to only 3.3% in 2000. So the nation will still need new office buildings.
Finally, look for green building to continue to take off. “A movement is afoot to make your next building LEED-certified,” said Nelson. One Virginia Tech study predicts LEED (Leadership in Energy and Environmental Design) construction will cost the same or less than non-LEED construction in 10 years, thanks in large part to tax breaks.