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Murfey Company

A closer look at non-residential construction growth next year

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Construction Growth
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Although there is continued speculation regarding a recession, many experts believe various negative factors will contribute to a domestic economic slowdown, which includes non-residential construction.

The trade war with Asia and a weakening export industry, economic weakness in Europe and Asia and a decline in employment growth will leave its footprint on the economy.

The growth of the non-residential construction in 2020 is expected to be slow at about 2 to 3 percent increase over 2019. The industrial, educational, public safety and office sectors all are primed for growth. The highest growth is expected with institutional building at 2.9 percent. Commercial building construction will see only one-half of a percent of growth.

The overall commercial construction market has received increased spending due to growth in e-commerce, gas prices and interest rates. Corporate relocations and the lack of vacancies in major metropolitan areas could result in growth for the office building market.

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The trade war in China will affect California in particular. The Port of Long Beach already has reported a 5 percent drop in trade with Asia. Due to this decrease, job growth in Southern California has slowed. The Inland Empire is affected considerably, because the area houses a high number of warehouse and logistics units.

On a positive note, construction in the leisure market is predicted to be strong. A high percentage of Americans are traveling as unemployment is historically low and incomes have increased.

In spite of significant increases in construction costs for both materials and labor, new hospitality construction is very strong in the state. Owners are choosing to build new in lieu of updating or renovating older structures.

In Southern California, hotel construction in Los Angeles is booming. This development partly is due to aggressive tax incentives that the city is offering for downtown development.

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Traditionally, San Diego’s hospitality market is robust all year long. In fact, hospitality construction in San Diego County has been very strong this past year – even though the city has not offering extra tax incentives.

In 2019, there were 19 hotels under construction in San Diego for a total of 2,310 rooms. Accounting for more than half of the rooms is the Manchester Pacific Gateway project – located in the city’s port district. This premier development is anticipated to open in 2021. This project will offer a two-hotel tower convention center with 1,090 rooms and one boutique luxury hotel with 260 rooms in addition to Class A office space, lifestyle and luxury retail shopping, dining and entertainment accounts.

Although the market is not saturated with rooms, the market will slow a bit in 2020. Experts predict that the addition of the Manchester Pacific’s room will play a role in this slowdown as a high percentage of rooms enter the market.

Murfey Company is a leader in real estate development and construction in all markets including non-residential, commercial and hospitality. To learn more, visit www.murfeycompany.com.


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