The Association for Retail Environments is predicting good days ahead for the U.S. economy in general and retail construction in particular. A.R.E.’s economic advisors say all indicators show that the 2016 economy in the U.S. will grow faster than it did in 2015. And while economic growth will slow in the back half of 2015, it will not be negative.
“Sixty-five percent of people polled by ITR Economics falsely believe that we are in a recession, so they’re not planning correctly for a growing environment,” said Todd Dittman, A.R.E.’s Executive Director. “We are encouraging A.R.E. members to start preparing now for 2016.”
Construction growth anticipated
We have been experiencing a recession hangover, where decisions to start projects come a bit slower than pre-recession practices. Yet the construction industry has been growing.
“As an industry,” Dittman said, “we have been experiencing a recession hangover, where decisions to start projects come a bit slower than pre-recession practices. Yet the construction industry has been growing around 3.5% to 4.5% this year.”
2016 looks more positive with non-residential growth forecasted at 6.3%. Indicators such as the Architectural Billings Index and office building starts are at double-digit growth.
A few trends:
- The growth in retail construction will slow down from 10% rolling 12 months, but will pick back up again in 2016.
- Opportunity areas in retail construction are with the luxury brands, dollar stores, and warehouses.
- Due to the online shopping trend, warehouse construction is up 52.3% this year.
- Retail construction trends continue to show smaller footprints in urban settings.
U.S. manufacturing also looks promising in 2016. North America is leading the way with the U.S. up 3.8% and Mexico up 3.7% this year. Drivers include near sourcing (customer orders coming back to the U.S.), improved technology, leveling of capital vs. labor costs, cheaper energy costs, and improved production efficiencies.
Another bright spot for manufacturing is employment, which has been trending down historically but is now turning positive again. There are 12.3 million workers in the manufacturing industry.
Ways to take advantage
Keeping in mind that A.R.E.’s advisors have a plus-94% accuracy history with their forecasting and they see 2016 as a growth year, A.R.E. is recommending that members and others in the retail environments industry take advantage of this information in the following ways:
- Marketing: Invest in customer market research to reduce price sensitivity, and increase your investment on the most effective advertising.
- Human resources: Make sure your training and retention programs are top-notch, and focus hiring on salespeople and leaders.
- Finance: Expand credit offerings to garner market share and lock in costs toward the end of 2015. And finally, drive efficiencies with technology.