Long the laggard in the nation's economic recovery, the Midwest at long last has gained sufficient momentum to significantly buoy regional design and construction activity. Indicators from construction employment to construction backlogs portend favorable conditions for the foreseeable future. Leading economists, including Ken Simonson, chief economist with Arlington, Va.-based Associated General Contractors of America, and Anirban Basu, chief economist with Washington, D.C.-based Associated Builders and Contractors, predict regional construction activity will accelerate by 6% to 10% this year, a pace similar to that for the country as a whole.
Public investment likely will remain spotty, though "pent-up demand is driving construction of roads and schools in many Midwest markets," Basu says.
Michigan, in particular, is undergoing a renaissance of sorts, with Detroit a primary beneficiary of new construction, including hotels, multifamily housing and a stadium for the National Hockey League's Detroit Red Wings. "There's certainly buzz surrounding Detroit these days, and the city is seeing population growth in defined areas, particularly among millennials," Simonson says.
Fiscally challenged Chicago, another underperformer in recent years, also is attracting a younger demographic in addition to corporate giants such as Motorola and Archer Daniels Midland, both of which relocated their headquarters there.
"Millennials continue to gravitate to cities where they can live, work and enjoy close proximity to dining, entertainment and transit," Simonson says. "Milwaukee and Cleveland also are doing well."
If there is a fly in the ointment, it's the strengthening of the U.S. dollar against foreign currencies, a circumstance that could cause Midwest industrial engines, key drivers of the region's recovery, to sputter. "Agriculture is vulnerable too," says Basu. "A widening trade deficit would disproportionately impact the Midwest. Unlike other regions, which are consumers of goods, the Midwest produces them. That could create problems if the dollar edges higher."
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