Design-build delivered projects will account for nearly half of all construction spending by 2025, according to the consulting and investment firm FMI’s latest market research on design-built utilization.
FMI’s research for its 50-page report is based on a survey of 279 industry stakeholders and 46 interviews. FMI conducted the study in partnership with the Design-Build Institute of America (DBIA), and piggybacks on research in 2018 that confirmed design-build was no longer just an alternative delivery method, but one that had been embraced by a growing number of owner-developers and their AEC partners.
FMI’s latest report, which it releases today, forecasts that spending for design-build construction put in place will grow at a compound annual rate of 7.6% over the years 2021 through 2025, and hit $405.7 billion in 2025, or 47% of total construction spending that year, vs 42% of the total in 2021.
FMI expects the five-year rate of growth to be higher than the national average in the West South Central, South Atlantic, Middle Atlantic, and New England regions.
CERTAIN SECTORS MORE DISPOSED TOWARD DESIGN-BUILD
Over the forecast years, FMI estimates that the aggregate spending on projects delivered via design-build will be $1.732 trillion, or 46.2% of the $3.742 trillion spent on all construction projects. Highway and street projects will account for 16% of the design-build spending, followed by Education (15%), Manufacturing (13%) and Commercial and Office (12% each). Spending on design-build water/wastewater projects is expected to show the highest annual growth rate—11.1%—although that sector will represent only 5% of total design-build project spending over the forecast years.
Design-build rated highest across all project delivery methods, with 77% of the report’s respondents having “very good” or “excellent” experiences with the method. The 2021 study found that 60% of respondents identified “owner goals and objectives” as an influence on their choice of delivery methods, following by 50% who identified a project’s complexity and innovation, and 46% who cited “delivery schedule” or “contractor experience.”
HIGH FAVORABILITY QUOTIENT
Seventy-seven percent of the study’s respondents thought that the design-build delivery method would increase over the next five years. “We have seen significantly more design-build work,” stated one respondent quoted in the report. “Virtually everything in our geography is going design-build,” said another.
Conversely, respondents with less favorable experiences with design-build delivery noted that some owners still see this method as a way of transferring risk to the building team, and underestimate the commitment needed to make this delivery method work.
Most respondents, however, saw myriad benefits in design-build. For example, 76% of architects, designers, and engineers, and 89% of GCs and CMs, cited increased collaboration and creativity. Greater project and design control was cited by 88% of GCs/CMs and 84% of specialty trade contractors. GCs/CMs (who represented 31% of the study’s respondents) like the opportunities to innovate that design-build methods afford them, as do 90% of owner’s reps.
Nearly half—47%—of organizations that responded to FMI’s survey use fixed price/lump sum contracts for their design-build projects, compared to 39% that use guaranteed max price contracts.
Related Stories
Market Data | Jul 5, 2023
Nonresidential construction spending decreased in May, its first drop in nearly a year
National nonresidential construction spending decreased 0.2% in May, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.
Apartments | Jun 27, 2023
Average U.S. apartment rent reached all-time high in May, at $1,716
Multifamily rents continued to increase through the first half of 2023, despite challenges for the sector and continuing economic uncertainty. But job growth has remained robust and new households keep forming, creating apartment demand and ongoing rent growth. The average U.S. apartment rent reached an all-time high of $1,716 in May.
Industry Research | Jun 15, 2023
Exurbs and emerging suburbs having fastest population growth, says Cushman & Wakefield
Recently released county and metro-level population growth data by the U.S. Census Bureau shows that the fastest growing areas are found in exurbs and emerging suburbs.
Contractors | Jun 13, 2023
The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of May 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator remained unchanged at 8.9 months in May, according to an ABC member survey conducted May 20 to June 7. The reading is 0.1 months lower than in May 2022. Backlog in the infrastructure category ticked up again and has now returned to May 2022 levels. On a regional basis, backlog increased in every region but the Northeast.
Industry Research | Jun 13, 2023
Two new surveys track how the construction industry, in the U.S. and globally, is navigating market disruption and volatility
The surveys, conducted by XYZ Reality and KPMG International, found greater willingness to embrace technology, workplace diversity, and ESG precepts.
| Jun 5, 2023
Communication is the key to AEC firms’ mental health programs and training
The core of recent awareness efforts—and their greatest challenge—is getting workers to come forward and share stories.
Contractors | May 24, 2023
The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of April 2023
Contractor backlogs climbed slightly in April, from a seven-month low the previous month, according to Associated Builders and Contractors.
Multifamily Housing | May 23, 2023
One out of three office buildings in largest U.S. cities are suitable for residential conversion
Roughly one in three office buildings in the largest U.S. cities are well suited to be converted to multifamily residential properties, according to a study by global real estate firm Avison Young. Some 6,206 buildings across 10 U.S. cities present viable opportunities for conversion to residential use.
Industry Research | May 22, 2023
2023 High Growth Study shares tips for finding success in uncertain times
Lee Frederiksen, Managing Partner, Hinge, reveals key takeaways from the firm's recent High Growth study.
Multifamily Housing | May 8, 2023
The average multifamily rent was $1,709 in April 2023, up for the second straight month
Despite economic headwinds, the multifamily housing market continues to demonstrate resilience, according to a new Yardi Matrix report.
