Midyear Report Shows Construction Industry Stability, Strength in 2024

The U.S. construction industry has shown resilience despite global challenges and the industry is adjusting to new patterns of demand, indicating variations in growth. JLL’s new 2024 Midyear Construction Update and Reforecast details how the year has unfolded so far compared to original predictions, and reforecasts what is expected in the second half of 2024.

Construction costs have stabilized in 2024 due to backlog-conscious contractors and improved material conditions. Though construction starts remain slow in some locations, and not all sectors are performing equally well, construction spending is up and some interest rate holdouts are moving on long-deferred projects.

Regarding interest rates, “higher for longer” is still the working paradigm, even with some rate cuts on the horizon; the era of near-zero interest rates is not likely to return. Private sector construction spending is increasing, aided by some loosening of capital, and public spending has also provided market stability. Infrastructure investment and post-pandemic economic recovery will continue to support the construction industry for years to come, both directly and indirectly.

Cost growth and development will persist despite financing constraints, so developers need to adapt to post-pandemic changes while managing debt, lease expirations and emerging geographical advantages. They must also navigate sustained higher interest rates and varying local outcomes.

“Confidence in the market, improved margins and stable material costs have resulted in a gradual increase in total costs,” said Louis Molinini, Americas market lead, Project and Development Services, JLL. “However, cost increases are not uniform across regions or project types, and maintaining connections with local industry experts and partners is essential for navigating disruptions effectively.”

Contractors are still taking cues from the positive signs for their next steps with hiring and retaining talent for the short term and anticipated work. Wage growth predictions remain moderately higher than historical rates as a result. Local market dynamics and corrections provide more useful insights and better detail industry nuances than national data.

“Strategic focus on select metros is critical,” said Andrew Volz, research, Project and Development Services, JLL. “Acknowledging the challenges posed by skill mismatch and industry disruption to the construction sector and geographically targeting capital spend in response can help optimize allocation and enhance project outcomes.”

While cost indices have remained relatively stable, certain opportunities have emerged due to underlying risks and changing demand patterns. Supply pressure exists for certain materials, and demand for new materials may not align with overall changes. Analyzing the disconnect from broader inflation caused by project specifications will be crucial in the coming years.

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