by Richard Friedman
Predicting the U.S. economy’s outlook in 2024 presents unique challenges. Even if the dysfunction in Congress dissipates and the likely presidential race between a politically unpopular octogenarian incumbent, an antagonistic septuagenarian facing 91 criminal charges, and an outlying independent from Camelot is more a sideshow than a driver, 2024 still has many questions. Will inflation remain in check? Will the Fed cut or raise interest rates? How will global conflicts impact us? What about stocks and bonds? Here is Friedman & Partners’ fearless prediction for the markets served by architecture, engineering and construction firms.
Single-Family
The NAHB/Wells Fargo Housing Market Index, which reflects the optimism of homebuilders on a 1-100 scale, plummeted from 84 in December 2021 to a dismal 34 in November 2023. Despite strong demand and low supply – usually a recipe for growth – higher mortgage rates and demographic complications stifled construction activity. Interest rates should pull back, and demand will grow as Gen Zers join the homeownership ranks while baby boomers and Gen Xers sit tight, so expect an improved, if unspectacular construction market in 2024.
Multifamily
Long immune to single-family’s volatility, the multifamily market finally cracked in 2023 as vacancy and interest rates rose and new construction finally dented insatiable demand. Still, multifamily remains healthy next year due to demographics and the need for affordable housing.
Commercial
Hope for a widespread rebound was dashed in 2023, but several long-struggling commercial markets rebounded somewhat. Most commercial markets have returned from the depths of the pandemic, but metrics suggest another year of uneven activity for lodging, retail, restaurants and office.
Industrial
The stellar market for warehouse/distribution facilities eased to more normal levels in 2023 as supply increased, demand eased and vacancies rose. The market isn’t likely to return to record-breaking levels in 2024, but growing consumer reliance on e-commerce and logistics advancements will keep industrial humming.
Public Infrastructure
The Infrastructure Investment and Jobs Act (IIJA) bolstered backlogs and revenue for AEC firms from coast to coast. The extensive need to upgrade aging infrastructure, combined with government financial support, will keep public markets hot.
Education
After a couple of rocky years, education bounced back in 2023. While growth is likely to ease, healthy levels of activity should continue.
Renewable Energy
In PSMJ Resources’ Quarterly Market Forecast (QMF) survey of proposal activity, renewable energy has been the leading or runner-up submarket in eight straight quarters. All indications are that this streak will continue in 2024.
Healthcare
The market cooled in 2023, but with Americans aging and living longer, and healthcare networks addressing deferred maintenance and technology upgrades, the long-term outlook remains solid.
Manufacturing
Manufacturing boomed in 2023. Expect more of the same with capital investments driven by the CHIPS and Science Act and other government incentives.
Final Thoughts
Most major markets and submarkets will perform similarly to 2023. More firms will cut spending and the job market won’t be quite as competitive. But if firms plan well and focus on consistent improvement, 2024 should be another strong year for the AEC industry.
Richard Friedman is the founder and president at Friedman & Partners.
