Recently, Building Solutions President John Kemp had the privilege of talking with Chief Economist Kermit Baker at AIA 2015. The interview started on a high note, both John and Kermit commenting on the general mood at the show was one of high optimism. They continued to go in-depth on recent changes and future growth. Continue reading for our highlights or watch the interview in its entirety here.
3 Reasons Why Multifamily is Booming
While the multifamily construction industry slowed significantly during the housing boom, it’s been on a tremendous rise recently. For three straight years, there has been growth of 35 to 40% annually in the multifamily construction market with no signs of slowing down.
There are three major factors contributing to the upturn in multifamily housing.
- Pent-up Demand: During the housing boom, multifamily units weren’t being built and existing units weren’t being re-invested since there wasn’t demand.
- Foreclosure: During the housing crash and housing downtown, a lot of owners lost their homes and had to move into rentals, creating demand in the multifamily sector.
- Millennials in the housing market: It had to happen some time. The largest generation in history has come of age and entered the workforce. But they’re taking their time starting families so instead of building homes, they’re flooding the rental market.
Shrinking Work Force Driving Innovative Construction
After losing a million and a half workers during the recession, the construction labor force is smaller now than ever. Most of those workers have moved on to other areas of the work force and are seemingly unlikely to return. Previously the industry relied heavily on immigrant workers, but with immigration numbers down the work force continues to dwindle and age. With construction accounting for 10% of the GDP, there’s very real concern if the labor force isn’t build up or used more productively there could be economic slowdown resulting.
One way they’re trying to stymie the dwindling of the work force is to focus on previously untapped demographics. In the past, women in construction were essentially non-participants but now they’re the largest growing group in the labor force.
In addition to looking in new places for workers, the dwindling numbers are driving innovation. There’s huge incentive on any process that can save labor or use labor more efficiently. The lean construction movement plays into this as designers make more out of less, showing how we can leverage that reduced workforce to gear up for growth.
New Growth
Kitchen and bath remodels have always been a strong force, and that is not changing but not growing, either. Outdoor living is growing, but still a bit niche. However there is one sector that is going to show huge growth—aging in place retrofits. As the baby boomers come into retirement age, more and more they are going to need accessibility in order to remain in their homes.
Sustainable design is on the rise too, more important now than ever. Demand is driving emergence of new segments that are growing in importance including:
- water conservation
- healthy home issues
- alternative energy
- rapidly renewable products
- materials reuse
- recycling.
Sustainability isn’t just a political buzz word. Consumers are more aware and concerned about their health. According to recently surveyed homeowners and renters, 25% of homeowners are concerned that their house is not making them healthy. That number rises to about 35% with renters.
The construction industry is an old industry, but evolving rapidly in response to a changing world and economy. For in-depth analysis, watch the full interview here.
