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AIA Insider: A Sit-Down With Chief Economist Kermit Baker

As many of you know, the AIA show was held last month in Atlanta, GA, where the Building Solutions headquarters are located.The show, which had over 7,000 attendees, was a success for us and for several other companies exhibiting.

During the conference we had a privilege to spend some time talking with Kermit Baker about the construction industry. Kermit is the Chief Economist for the AIA and also the Program Director for the Joint Center of Housing Studies’ Remodeling Futures Program at Harvard University. John Kemp, President of Building Solutions, led the conversation with Kermit.

Watch the Interview

The conversation focused around three main topics, highlighted below:

Which End-Markets are Poised for Growth?

According to Kermit, multi-family is blazing, growing at 35-40% annually for the past three years. Three main factors are supporting this growth: pent-up demand since multi-family was weak/stagnant during housing boom; the housing crash and downturn also led several owners who lost their home to have to go into the rental market; and finally an overall delay in household formation from the Millennials, who continue to delay marriage and having children.

Kermit also noted that the commercial sector (office, retail, hospitality) has been good. On the not so strong side was the Institutional market (education, healthcare), which has been slow; however, their Architectural Billings Index is suggesting a turnaround since Institutional architects have been very busy for the past months.

Finally, Kermit highlighted that the Healthcare market will likely be the strongest in the non-residential sector in the next decade, not only due to Affordable Care Act, but because of the fundamental demographics driving this industry with Baby Boomers aging.


What Innovations are Happening in Construction?

Regarding innovation, Kermit believes several innovations will be coming out in the next cycle, especially to help solve the labor shortage happening in construction. The construction sector lost 1.5 million workers because of the crisis, which are unlikely to come back to construction. Our industry is facing a huge problem replenishing the labor force, which is a lot older than it used to be, continues to rely on a diminishing (in numbers) immigrant populations and very limited participation of women. Therefore, any process that helps use labor efficiently will be a trend in the future. We need to rebuild the labor force or find ways to be more productive in order to realize as much growth as is needed in construction market and continue to contribute to GDP growth.

What is Driving the Remodeling Industry?

Kermit’s experience with the Remodeling Futures Program at JCHS makes him an expert in this market and we wanted to understand what are the hot spots in this market. According to Kermit, overall, kitchen and bath updates have always been a significant portion of the remodeling industry and together with outdoor living will continue to be an important part of this market. However, they are seeing a shift to what will drive remodels moving forward. Kermit is seeing two main trends for remodels:

  • Aging in place retrofits
  • Sustainability updates including energy efficiency retrofits as well as water conservation, healthy home concerns, alternative energy sources, renewable products and material reuse/recycle.

Furthermore, Kermit told us that 25% of people are concerned that their homes aren’t making them healthy. The population overall has greater awareness of health related issues and how the environment can influence it.

These are just some of the highlights from this great interview. To watch it in its entirety follow the button below.

Watch the Interview


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