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https://www.floorcoveringweekly.com/main/features/a-construction-turnaround-starts-with-housing-45335?utm_medium=email&utm_source=FCW-NL-Weekly
Nonresidential building spending is slowing, with weakness projected through 2026. A rebound in homebuilding is unlikely soon due to high prices and interest rates. Conversion of commercial buildings to housing offers some optimism.
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- AI Headline
- A Construction Turnaround Starts with Housing
- Simplified Title
- Housing Market Slows Construction Spending 2025
- AI Excerpt
- Nonresidential building spending is slowing, with weakness projected through 2026. A rebound in homebuilding is unlikely soon due to high prices and interest rates. Conversion of commercial buildings to housing offers some optimism.
- Subject Tags
-
Housing Market Construction Industry Real Estate Commercial Real Estate Economic Trends Building Conversions
- Context Type
- Analysis
- AI Confidence Score
-
1.000
- Context Details
-
{ "tone": "analytical", "perspective": "neutral", "audience": "specialized", "credibility_indicators": [ "expert_quotes", "data_cited" ] }
Source Information
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- Overall Status
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Completed
- Submitted By
- Donato V. Pompo
- Submission Date
- August 9, 2025 at 2:47 PM
- Metadata
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Generally, an upturn in spending on buildings is preceded by a rebound in the housing market. At present, however, a recovery in homebuilding activity seems unlikely anytime soon, although the conversion of commercial facilities to residential uses does provide some basis for optimism.\nBy Kermit Baker\nSpending on nonresidential buildings is expected to continue to slow this year, with weakness projected at least through 2026. Generally, an upturn in spending on buildings is preceded by a rebound in the housing market. At present, however, a recovery in homebuilding activity seems unlikely anytime soon, although the conversion of commercial facilities to residential uses does provide some basis for optimism. \nSpending on the construction of commercial, industrial and institutional facilities saw a strong surge earlier this decade. There was a 12 percent increase in spending on buildings in 2022 following a pandemic-induced downturn, a rebound that accelerated to 23 percent growth in 2023. Last year saw an additional 6.5 percent increase, bringing the three-year growth total to almost 50 percent. However, this slowdown in spending on buildings is continuing. Through the first five months of this year, spending has actually declined compared to year-ago levels, with the commercial sector \u2014 offices, retail, and hotels \u2014 leading the downturn. Members of the American Institute of Architects Consensus Construction Forecast Panel expect only modest gains this year and next. \nConstruction downcycles are often short-lived, so we might be excused for thinking about the timing of the next upturn. Homebuilding is typically a very useful and accurate leading indicator of future nonresidential building trends. For example, in 2021 when the economy was beginning to emerge from the pandemic, housing starts increased 16 percent over 2020 levels, even as spending on nonresidential building declined almost 5%. By 2022 however, nonresidential spending saw double-digit gains that accelerated even more the following year.\nSo, the question is after a 9 percent decline in 2023 and an additional 4 percent decline last year, when can we expect a rebound in homebuilding? The answer seems to be not anytime soon. The combination of high house prices (house prices nationally have increased 50 percent from pre-pandemic levels), stubbornly high mortgage rates (recently stuck in the 6.75 percent to 7 percent range for 30-year fixed rate mortgages), increases in home insurance premiums and property taxes (insurance premiums increased more than 50 percent nationally between 2019 and 2024), and the rising costs of construction materials and labor are all headwinds to a meaningful housing recovery. Housing starts so far in 2025 have not improved from 2024 levels, and the National Association of Home Builders is projecting housing starts to remain flat this year and only increase in the low single-digit range in 2026 and 2027.\nWith new residential construction activity effectively stalled, one area of optimism is the conversion of commercial buildings to housing. With a significant share of workers working remotely, at least some days, office vacancy rates have climbed, provoking a commensurate decline in office real estate values. Likewise, hotel occupancy rates have declined in many areas as business travel has waned given the growing popularity of virtual meetings. Local governments have encouraged \u2014 and often subsidized \u2014 the conversion of these facilities to alternative uses in an effort to support the local property tax base. \nHousing, and in particular affordable rental housing, is a popular target for these conversions. RentCafe reported earlier this year that almost 71,000 office-to-apartment conversions were underway nationally. And while office to apartments are the most popular conversions, they account for only 42 percent of adaptive reuse projects where apartments are created. Hotel conversions account for an additional 22 percent, and factories and warehouses another 17 percent. These almost 170,00 conversions underway can make a significant impact on increasing housing opportunities given that there were only just over 350,000 multifamily housing starts nationally last year. And the impact will be even greater in metro areas with the least affordable housing stock. Apartment conversions currently in the pipeline total almost 16,000 units in New York, over 10,000 in Washington, D.C., almost 9,000 in Los Angeles and almost 7,000 in Chicago. \nFCW Live\nDigital Edition\nWelcome to Floor Covering 101\n\u00a0\nStories to Sell by\n \n Floorzap\n \n \n Mohawk\n \n \n Lions\n \n \n Forbo\n \n \n Shaw\n \n12345\nCalendar of Events (scroll down)\nQFloors 25th Anniversary Users Conference Cruise \nAugust 16 - August 23, 2025\nHolland America Konigsdam - Alaska\nNFA Fall Conference \nSeptember 14 - September 18, 2025\nStarnet Fall Meeting \nOctober 24 - October 26, 2025\nLoews Ventana Canyon Resort Tucson, AZ \nTSP, The Tile Industry Conference\nOctober 27 - October 29, 2025\nPhoenix, AZ\nNAFCD Annual Convention\nNovember 4 - November 6, 2025\nChicago, IL\nSouthwest Flooring Market\nJanuary 9 - January 10, 2026\nArlington Convention Center, Arlington, TX\nSoutheast Flooring Markets\nJanuary 22 - January 23, 2026\nCobb Galleria, Atlanta\nThe International Surfaces Show\nJanuary 26 - January 29, 2026\nMandalay Bay, Las Vegas, NV \nThe Synergy Convention 2026\nJanuary 27 - January 29, 2026\nLas Vegas, NV\nFloors To Go & Abbey Convention\nFebruary 8 - February 10, 2026\nFt. Lauderdale, FL", "ai_headline": "A Construction Turnaround Starts with Housing", "ai_simplified_title": "Housing Market Slows Construction Spending 2025", "ai_excerpt": "Nonresidential building spending is slowing, with weakness projected through 2026. A rebound in homebuilding is unlikely soon due to high prices and interest rates. 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Features Friday, August 8, 2025 A Construction Turnaround Starts with Housing Spending on nonresidential buildings is expected to continue to slow this year, with weakness projected at least through 2026. Generally, an upturn in spending on buildings is preceded by a rebound in the housing market. At present, however, a recovery in homebuilding activity seems unlikely anytime soon, although the conversion of commercial facilities to residential uses does provide some basis for optimism. By Kermit Baker Spending on nonresidential buildings is expected to continue to slow this year, with weakness projected at least through 2026. Generally, an upturn in spending on buildings is preceded by a rebound in the housing market. At present, however, a recovery in homebuilding activity seems unlikely anytime soon, although the conversion of commercial facilities to residential uses does provide some basis for optimism. Spending on the construction of commercial, industrial and institutional faci...
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Simplified: Spending on nonresidential buildings is expected to slow this year
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Simplified: Weakness is projected through 2026
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Simplified: Recovery in homebuilding activity seems unlikely soon
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The conversion of commercial facilities to residential uses does provide some basis for optimism.0.850👤 Kermit Baker 📋 News Article 🏷️ Commercial Facilities , Residential Uses , Economy 🆔 a1164541-7f95-420a-bc91-1bddfd09014dSimplified: Conversion of commercial facilities to residential uses provides basis for optimism
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Simplified: Spending on construction of commercial industrial and institutional facilities saw strong surge earlier this decade
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Simplified: Rebound accelerated to 23 percent growth in 2023
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Simplified: Last year saw additional 6.5 percent increase bringing three-year growth total to almost 50 percent
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Simplified: Spending has declined compared to year-ago levels through first five months of this year
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Simplified: Commercial sector offices retail and hotels [is] leading downturn
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Simplified: Construction downcycles are often short-lived
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Simplified: Mortgage rates recently stuck in 6.75 percent to 7 percent range for 30-year fixed rate mortgages
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Simplified: Insurance premiums increased more than 50 percent nationally between 2019 and 2024
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Simplified: Housing starts in 2025 have not improved from 2024 levels
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Office vacancy rates have climbed, provoking a commensurate decline in office real estate values.0.950Simplified: Office vacancy rates have climbed provoking decline in office real estate values
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Simplified: Hotel occupancy rates have declined in many areas as business travel has waned given growing popularity of virtual meetings
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Simplified: Local governments have encouraged conversion of facilities to alternative uses to support local property tax base
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Housing, and in particular affordable rental housing, is a popular target for these conversions.0.900Simplified: Housing and affordable rental housing is popular target for these conversions
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Simplified: Almost 71000 office-to-apartment conversions were underway nationally
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Simplified: Hotel conversions account for additional 22 percent
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Simplified: Factories and warehouses [account for] another 17 percent