Renovation activities supporting the growth of the construction industry in the United States

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In the United States, the trend of renovating and fixing up older buildings across the country has picked up increasing momentum over the last few years. This trend, which emerged first in Chicago, has slowly engulfed the entire country and for the first time in 20 years, renovations have overtaken new construction, according to a report from the American Institute of Architects.

In Chicago, in 2019, the mayor announced an investment of US$1.4 billion towards the redevelopment of properties across the South and West sides of the city. This initiative was aimed at restoring the commercial corridors that were destroyed during the mid-20^th century urban renewal initiatives. Ever since 2019, the trend of renovation has moved beyond Chicago, and as of Spring 2022, the majority of the revenue for the architecture firms is coming from renovation work and not new construction.

According to a report from the American Institute of Architects (AIA), renovation work in the country has crossed over 50%. During 2005, the pre-recession period, renovations made up approximately one-third of the buildings. This percentage has been increasing steadily ever since 2017, when it reached 44.4%, and has further increased to reach 52% in 2022. Notably, the trend of renovation is widely distributed across different types of buildings. However, there are some building types that are seeing high rates of renovation. For instance,

• According to ConsTrack360, office buildings, and manufacturing facilities are among the building types that are seeing high rates of renovation. Office buildings are getting fitted with more amenities to lure people back to the office environment after the pandemic outbreak. In Q3 2022, ConsTrack360 estimated renovation work at 41% of the total construction activity in key cities.

The growing trend of renovation activities in the United States is also reflective of the current macroeconomic environment. Notably, a strong economic environment results in more new construction activities, whereas a weaker economic environment often results in more renovation work. Given the weak market sentiments amid rising inflation and interest rates, the surge in renovation activities is, therefore, expected to further persist from the short to medium-term perspective in the United States. Consequently, ConsTrack360 expects that the new construction activities will lag in comparison to the renovation work at least till the end of 2023.

Home renovation activities have also resulted in a surge of rehab work over the last few years. For instance,

• According to a report from US Census Bureau, 59% of the homeowners in the country undertook renovation work between 2019 to 2021. With people demanding more space inside their residences due to the lockdown and work-from-home measures, there was an uptick in home renovation activities. But the pandemic-driven renovation work was only a part of the total demand.
• According to an AIA report, the global pandemic inspired only 10% of the total renovation work. Aging structures and the need for freshening were among the other reasons driving the renovation work over the last few years in the United States. Notably, the trend of renovating residential units is expected to further increase in 2022. The report from AIA indicated that 17.5% of the billings for architectural firms were from residential renovation work, and this is expected to surge to 28% in 2022.

While the construction sector is expected to face growing pressure due to rising inflation, interest rates, and shortage of available labor from the short to medium-term perspective, the industry is projected to receive growth support from the growing renovation activities seen across the United States. The surge in renovation work, across different building types, is expected to further grow over the next few quarters, which will subsequently support the industry growth in the country over the next few quarters.

To know more and gain a deeper understanding of the construction industry in the United States, click here.