US Construction: Biden’s billions to boost non-residential spending in 2022

Office construction to underperform

Compositionally, office construction is likely to remain subdued, but this accounts for only 10% of US non-residential construction spending. Working from home has undoubtedly been a success with technology certainly meeting and, in most cases, beating expectations. We are unlikely to go back to the way things were with everyone in the office at all times.

Instead, some form of hybrid model is most likely. This will limit the need for additional office space with firms more likely seeking to sub-let unutilised floors. Emergency back-up sites will also no longer be required with working from home available. This could also hamper any recovery in the commercial sector, particularly in major cities.

While footfall in office areas will increase, it won’t return to pre-Covid levels quickly so neither will demand for food outlets, bars, restaurant and business hotels. Indeed, business travel in general is unlikely to make a full recovery with video conferencing a much cheaper option, compounding the issue for major commercial centres. That said, given the effective mothballing of numerous entertainment venues, hotels, bars and restaurants over the past 18 months, there is clearly scope for significant refurbishment work, which will benefit the construction sector.

Moreover, with online shopping set to hold onto much of the gains made as a proportion of total spending, demand for logistics centres and warehousing looks set to continue growing.

There is also likely to be more demand for recreational areas outside of the major cities given households will likely spend less time commuting to work and more time in their local areas.

We would also imagine a strong pipeline of work required for educational buildings as students return.