Jakson FMI'S Five-Year Forecast täydellinen litterointi

quarter's data if they weren't to read the report? 00:02:15.083 --> 00:02:20.189 Yeah gosh there there is a lot there however if you just look at the numbers, 00:02:20.689 --> 00:02:25.779 if you're just looking at construction spending the the environment looks pretty 00:02:25.779 --> 00:02:28.323 tame you know we've got uh you know. 00:02:29.354 --> 00:02:34.293 Basically a flat 2025, mild declines in 2026. 00:02:35.239 --> 00:02:40.276 But if you look under the headline numbers, there's actually a lot of volatility 00:02:40.276 --> 00:02:43.596 and a lot of big movements going on in the different segments, 00:02:43.596 --> 00:02:45.683 which I'm sure we'll get into. 00:02:46.606 --> 00:02:51.545 And there's a whole bunch of factors impacting why that is happening between 00:02:51.684 --> 00:02:55.266 the policy environment and supply and demand imbalances. So, 00:02:55.893 --> 00:02:57.309 yeah, looking forward to getting into that. 00:02:57.983 --> 00:03:01.846 So if you look across all the market segments that you track, 00:03:02.186 --> 00:03:07.393 what would you say are the growth or the major decline stories that you're seeing? 00:03:08.031 --> 00:03:14.386 Yeah, so there's growth concentrating in what I speak to as digital infrastructure, 00:03:14.386 --> 00:03:18.465 which I'm mainly talking about data centers, no surprise there. 00:03:18.947 --> 00:03:22.146 But then all the infrastructure that supports that build out. 00:03:22.146 --> 00:03:26.111 So power is a significant one. water communication. 00:03:27.618 --> 00:03:32.910 And then we've got a whole broader infrastructure kind of theme going on in our forecast. 00:03:33.615 --> 00:03:39.633 Where concentration is showing up this year and last is. 00:03:41.546 --> 00:03:49.632 A big decline in manufacturing that's really kind of pulling total non-res down this year. 00:03:49.942 --> 00:03:55.226 We've also got challenges in residential, single family and multi-family new 00:03:55.226 --> 00:04:02.246 construction is is looking like it's going to be down this year which is concerning but yeah growth, 00:04:03.056 --> 00:04:08.296 growth on the digital infrastructure side and then declines and manufacturing 00:04:08.296 --> 00:04:14.936 and residential and and you've got uh some some reasons and and movement therein. 00:04:15.952 --> 00:04:19.919 Yeah, let's stick with manufacturing for a second. So it's really been one of 00:04:19.919 --> 00:04:24.389 the defining stories of the last several years. It has been the largest and 00:04:24.389 --> 00:04:26.389 fastest growing market of them all. 00:04:27.122 --> 00:04:31.119 So what are you seeing in particular to that market today? And how do you expect 00:04:31.119 --> 00:04:34.558 it to perform over the next few years? Obviously, it's declining. 00:04:34.958 --> 00:04:38.549 Some say it's like, is it a rebalancing? Is it a bubble? You know, 00:04:38.549 --> 00:04:39.805 what do you think's going on there? 00:04:40.430 --> 00:04:45.079 Yeah, so it definitely looked like a bubble, all stemming from the Chips and 00:04:45.079 --> 00:04:49.192 Science Act, which started, I think, mid to late 2021. 00:04:49.801 --> 00:04:57.703 You started seeing spending in 2022 in an environment where inflation was a big deal. 00:04:58.023 --> 00:05:03.915 And so where we are currently, 25 and in 26 and, 00:05:04.912 --> 00:05:08.933 The declines that I'm speaking to are basically the backside of the spending 00:05:08.933 --> 00:05:16.659 wave, which is a large majority of the semiconductor fat plants. 00:05:18.143 --> 00:05:22.703 That's really interesting because, you know, we all thought that with the onshoring 00:05:22.703 --> 00:05:26.475 and the tariffs that it would potentially fuel that market further. 00:05:26.841 --> 00:05:31.537 But just like you're saying, it sounds like you can confirm that the spending is falling off. 00:05:31.892 --> 00:05:35.003 I mean, it's still a very large market. I think it's still the second largest 00:05:35.003 --> 00:05:36.129 market that's out there. 00:05:36.692 --> 00:05:39.235 But you're saying we're probably not going to see future growth there. 00:05:40.623 --> 00:05:44.353 So I'm talking about the declines last year and this year. I do expect kind 00:05:44.353 --> 00:05:49.538 of a broadening return to growth over the forecast period. 00:05:50.055 --> 00:05:57.321 But what we're seeing right now is declines. And that's bringing the whole industry down this year. 00:05:57.940 --> 00:06:04.259 I mean, you got the fab plants. You got a pullback in EV manufacturing, 00:06:04.857 --> 00:06:11.743 but we do see chemical, food and bev, metals, pharmaceuticals. 00:06:12.803 --> 00:06:17.563 There is a lot more manufacturing, kind of what I'm talking about, 00:06:17.563 --> 00:06:19.783 the broadening base coming. 00:06:19.969 --> 00:06:24.423 And we can see those projects. And it's just a matter of competing with the 00:06:24.423 --> 00:06:30.200 same resources that the digital infrastructure build out is pulling from. 00:06:31.223 --> 00:06:37.426 So the equipment and the labor. Really, another interesting trend here is the mega projects. 00:06:38.523 --> 00:06:43.873 So a lot of this is billion dollar plus projects, which is only limited to select, 00:06:44.534 --> 00:06:48.040 companies or stakeholders that can perform those projects. 00:06:48.786 --> 00:06:51.673 It definitely sounds like there's a bifurcation going on in the market, 00:06:51.673 --> 00:06:56.513 too. So I'm hearing semiconductor manufacturing lagging, but other segments 00:06:56.513 --> 00:06:59.953 within manufacturing are seeming to do well or are going to rise out of it. 00:07:00.865 --> 00:07:05.192 All right, so let's move on to data centers because that's another hot market right now. 00:07:05.192 --> 00:07:09.782 So they're dominating industry conversations, of course. Are they still the 00:07:09.782 --> 00:07:14.162 biggest growth story in design and construction?

What are you watching most 00:07:14.162 --> 00:07:17.786 closely as AI-driven demand continues to expand here? 00:07:18.645 --> 00:07:25.013 Yeah, it's really interesting. I've been watching data centers for, gosh, at least 10 years. 00:07:25.554 --> 00:07:29.872 And so to put this all in perspective, as of five years ago, 00:07:29.872 --> 00:07:34.332 2021, the data center spend is 6x'd. 00:07:34.372 --> 00:07:41.042 And so significant growth, even before AI kind of took hold, 00:07:41.042 --> 00:07:44.513 now that AI adoption is part of the story. 00:07:45.033 --> 00:07:50.756 And, you know, where that goes, it's hard to say, but we've got robotics to think about and, 00:07:51.534 --> 00:07:56.555 you know, different, you know, gen AI, quantum computing, all kinds of things, 00:07:57.008 --> 00:08:01.501 that seem to continue to push the demand story for data centers. 00:08:02.588 --> 00:08:09.394 So, yeah, it is definitely the biggest growth story in our forecast. 00:08:09.911 --> 00:08:14.731 We do expect it to double basically over a five-year forecast, 00:08:14.731 --> 00:08:19.576 so going from about $60 billion to $120 billion. 00:08:19.576 --> 00:08:25.921 And what's really interesting is that data centers are tracked via the census 00:08:25.921 --> 00:08:28.083 as a subsegment under office. 00:08:28.704 --> 00:08:31.734 And so when you think about traditional office construction, 00:08:32.019 --> 00:08:37.201 and you're just looking at it at a segment level, you know, that the data center 00:08:37.561 --> 00:08:42.361 build, you know, is a lot different than a traditional office build. 00:08:42.361 --> 00:08:47.707 And it's just changing the shape of what we think about traditional non-rise buildings. 00:08:48.637 --> 00:08:52.211 So this sets up for a great, great follow-up question from one of our Market 00:08:52.211 --> 00:08:53.606 Intelligence Committee members. 00:08:53.874 --> 00:08:58.331 He wanted me to ask, quote-unquote, we're on a fine line between energy demand 00:08:58.331 --> 00:09:00.162 and the data center explosion. 00:09:00.377 --> 00:09:04.911 What would be the economic consequence if the balance shifts in one direction 00:09:04.911 --> 00:09:07.232 instead of both sides growing equally? 00:09:07.713 --> 00:09:11.411 So really, not only, I mean, I don't want to just say power because it's a water 00:09:11.411 --> 00:09:13.837 drag too. So what happens there? 00:09:14.667 --> 00:09:20.172 If you're talking about a balance at the segment level, I don't think that that, 00:09:20.700 --> 00:09:22.701 would happen. One needs the other. 00:09:23.301 --> 00:09:29.780 But currently there is a supply and demand imbalance impacting both segments 00:09:30.216 --> 00:09:31.441 where you got the same labor, 00:09:32.062 --> 00:09:38.361 similar equipment or same manufacturer's equipment that needs to supply the 00:09:38.361 --> 00:09:39.792 inputs on those projects. Yeah. 00:09:42.498 --> 00:09:47.728 There is some risk in the data center market in that, you know, 00:09:47.728 --> 00:09:57.138 if something disrupts the AI adoption curve or the needs for future data center facilities, 00:09:58.138 --> 00:10:05.188 then the power demands, kind of what we think of as a large load growth in our 00:10:05.188 --> 00:10:07.771 forecast, isn't needed. 00:10:08.247 --> 00:10:12.645 So I don't see that happening. That's not my base case. But, 00:10:13.603 --> 00:10:22.793 you know, the power growth story is rooted in the data center build out and needs there. 00:10:23.597 --> 00:10:27.858 So let's stay with that line of thinking, the power story. You recently told 00:10:27.858 --> 00:10:32.988 me about a new energy and power overview that FMI put out, and you forecast 00:10:32.988 --> 00:10:37.285 that more than a trillion in power-related investment is expected through 2030. 00:10:37.553 --> 00:10:40.828 So what's driving this growth cycle if it's not data centers, 00:10:40.828 --> 00:10:42.435 or is it in fact just them? 00:10:43.198 --> 00:10:46.643 And where do you see the biggest opportunities for contractors and investors? Yeah. 00:10:47.650 --> 00:10:54.558 Yeah, so what's driving the power forecast, and we've got to a 10% kegger on 00:10:54.558 --> 00:10:58.291 our power forecast. Yeah, like you said, a trillion dollar market. 00:10:59.176 --> 00:11:03.855 Approximately half of that is electric transmission and distribution. 00:11:04.514 --> 00:11:11.833 And another third is generation. We've not had a condition where, 00:11:12.321 --> 00:11:19.300 at least in the past several decades, where generation demand growth is on the path that it is. 00:11:19.770 --> 00:11:24.054 And that's coming from data centers, but it's also coming from manufacturing, 00:11:24.776 --> 00:11:29.155 reshoring, alongside electrification trends. 00:11:29.544 --> 00:11:33.317 So, you know, electric cars, electric appliances, and so forth. 00:11:33.923 --> 00:11:42.648 What I attribute most of that 10% CAGR to is large load demand growth. 00:11:43.000 --> 00:11:45.775 So 80% of it is coming from that. 00:11:46.396 --> 00:11:51.559 We've got another 20% coming from kind of grid sustainability, 00:11:52.777 --> 00:11:54.222 you know, just keeping things running. 00:11:55.514 --> 00:11:59.685 So when thinking about the large load growth. 00:12:02.163 --> 00:12:08.228 In that energy report, gas power generation, I think, has the highest kegger 00:12:08.436 --> 00:12:10.991 of anything that we've broken out, 00:12:12.015 --> 00:12:17.697 which is, again, tied to data center campuses and manufacturing. 00:12:18.265 --> 00:12:25.575 But then you've got the whole interconnectivity issue with transmission distribution 00:12:25.575 --> 00:12:29.169 also, you know, in that 10 to 11 percent CAGR. 00:12:29.855 --> 00:12:32.164 So everything is really needed. 00:12:32.945 --> 00:12:37.960 So I did want to ask a follow-up question on the data centers. 00:12:38.326 --> 00:12:43.465 Do you think these moratoriums

that we're hearing about and this AI bubble, 00:12:43.465 --> 00:12:46.255 do you think that's going to slow things down or do you think we're going to 00:12:46.255 --> 00:12:47.155 see momentum continuing? 00:12:48.602 --> 00:12:54.587 Well, it's causing a lot of disruption in the data that I look at to forecast, 00:12:55.543 --> 00:13:03.828 data centers in that moratoriums are putting pressure on where the projects are going to end up. 00:13:04.959 --> 00:13:09.243 The owners of these projects want to get them done as fast as possible, 00:13:09.423 --> 00:13:13.610 or at least get them started as fast as possible. 00:13:13.981 --> 00:13:20.329 One, to navigate kind of the future of these policies, but then also just to, 00:13:20.809 --> 00:13:23.178 get their facility in the ground up and running. 00:13:23.889 --> 00:13:29.985 This is the private side of the market, and speed to market is very important, 00:13:30.241 --> 00:13:36.518 especially in an environment like this where there's such a demand imbalance. 00:13:37.266 --> 00:13:46.193 But these moratoriums are changing the landscape of where projects can go. 00:13:46.785 --> 00:13:49.089 Whereas historically, a data 00:13:49.089 --> 00:13:52.998 center owner would look for wherever there's cheap power and cheap land. 00:13:53.573 --> 00:13:58.829 And now we've got to navigate these policies that are set at the state level 00:13:58.829 --> 00:14:05.049 or local level on top of a pretty complicated environment, looking at labor, 00:14:05.049 --> 00:14:07.452 looking at availability of equipment. 00:14:08.025 --> 00:14:13.189 And then on top of that, the interconnection issues where you've got a multi-year 00:14:13.189 --> 00:14:19.268 backlog of interconnection requests ahead of you. Yeah. 00:14:20.377 --> 00:14:23.740 Yeah, that's causing a lot of disruption in the data that I look at, 00:14:23.740 --> 00:14:30.300 whereas we're seeing data center projects canceled for the first time since 00:14:30.300 --> 00:14:31.476 I've tracked this segment, 00:14:32.040 --> 00:14:33.430 whereas historically it's the 00:14:33.430 --> 00:14:37.775 hyperscaler owners, they know what they want to build and they go do it. 00:14:38.257 --> 00:14:42.720 Now you've got speculators in the market, and I have a feeling a lot of these 00:14:42.720 --> 00:14:46.138 policies are a result of the speculators entering the market. 00:14:47.073 --> 00:14:49.060 And the result of the policies is 00:14:49.060 --> 00:14:57.017 that the projects have become much more speculative in nature in that, you, 00:14:57.841 --> 00:15:03.520 know, if you've got a private investor, they might not want to have one project 00:15:03.520 --> 00:15:06.795 as their big bet as entering into space. 00:15:07.150 --> 00:15:09.768 It might create multiple projects. 00:15:10.429 --> 00:15:18.299 And then that results in, you know, a lot of noise in the project level data I look at to forecast. 00:15:19.116 --> 00:15:22.380 Yeah, I mean, it definitely sounds like these data center developers are facing 00:15:22.380 --> 00:15:27.020 an uphill battle with these local moratoriums. But I also wanted to ask, 00:15:27.020 --> 00:15:30.208 because I feel like I can't talk about data centers without power. 00:15:30.545 --> 00:15:34.927 And so I'm also hearing that transmission delays, the turbine delays. 00:15:35.194 --> 00:15:40.150 Do you think the supply chain can keep up with the power growth that's needed 00:15:40.150 --> 00:15:43.030 to fuel these data centers? Well, it's not. 00:15:44.322 --> 00:15:47.178 It's not already. Actually, I don't think so. 00:15:47.652 --> 00:15:52.380 I think if there wasn't an imbalance and we could produce as much equipment 00:15:52.380 --> 00:15:57.118 that was needed to get everything installed quickly, we would see a much more... 00:15:58.127 --> 00:16:04.488 Volatile spending curve. So when I draw these forecasts, I am accounting for. 00:16:05.688 --> 00:16:13.727 Delays and multiple delays and probably projects getting repositioned or shelved for whatever reason. 00:16:14.484 --> 00:16:18.158 Very insightful, Brian. I think I've got time for one more question before we wrap up. 00:16:18.158 --> 00:16:21.418 So let's do a little bit of forecasting. So looking ahead five years, 00:16:21.418 --> 00:16:24.848 because that's what the Engineering Construction Outlook does with FMI, 00:16:24.848 --> 00:16:26.708 which sectors do you believe will 00:16:26.708 --> 00:16:32.388 actually create or could create the most opportunity for our AEC industry? 00:16:32.388 --> 00:16:38.448 And what should leaders be doing today to position themselves for that future? We talked about power. 00:16:39.379 --> 00:16:44.478 That's basically at the top of my list. And if they're not already in data centers, 00:16:44.478 --> 00:16:46.098 you know, there's a connection there. 00:16:47.042 --> 00:16:51.333 Beyond that, I would say repurposing of buildings is a really interesting story, 00:16:51.554 --> 00:16:56.897 whereas we've got traditional office or maybe big box retail, 00:16:57.577 --> 00:17:03.784 things of that nature that need a new story or purpose in their communities. 00:17:04.144 --> 00:17:08.467 And then beyond that, we've got a new infrastructure bill that's on the table 00:17:08.467 --> 00:17:15.450 for the end of this year, which will likely get signed and approved by hopefully this time next year. 00:17:15.785 --> 00:17:20.277 And then that sets up for, you know, a lot of infrastructure and potentially 00:17:20.277 --> 00:17:25.780 new policies to help support other areas of the industry that are struggling. 00:17:26.582 --> 00:17:30.067 You brought up a great market that we didn't even get into, but that is definitely 00:17:30.067 --> 00:17:33.927 one we're looking at as well as the conversion opportunities and the affordability 00:17:33.927 --> 00:17:36.393 discussion of office to residential. 00:17:36.764 --> 00:17:41.942 But I wanted to ask one more, like, quick hit, if I could, because I'm interested in your opinion. 00:17:42.360 --> 00:17:46.097 Is it too late to get into data centers? If you haven't been in data center 00:17:46.097 --> 00:17:50.992 work at all, is it too late to get into it now? Is the market maturing in your opinion? 00:17:52.257 --> 00:17:58.288 I would say no. I mean, I don't see an end to the need to build these things. 00:18:00.426 --> 00:18:07.749 Of course, nothing lasts forever, but it is not in our forecast that spending declines. 00:18:08.133 --> 00:18:14.511 It continues to grow. It grows at a slower rate in the later years of our forecast. 00:18:15.193 --> 00:18:21.540 But, you know, it's $100 billion plus market by 2029, 2030. 00:18:22.657 --> 00:18:27.991 And, yeah, there's a lot of room there. Also, I would say getting into megaprojects, 00:18:28.443 --> 00:18:32.792 more broadly is going to be an interesting area. 00:18:32.908 --> 00:18:36.927 You know, if you look at kind of the split or the, you know, 00:18:36.927 --> 00:18:38.864 the kind of the case shape, 00:18:39.574 --> 00:18:44.797 that the industry is taking hold of with the digital infrastructure build out 00:18:44.797 --> 00:18:49.327 and manufacturing, playing in the mega project space is going to open up a lot 00:18:49.327 --> 00:18:50.786 of opportunities in the future. 00:18:52.606 --> 00:18:55.193 Well, thank you very much for that feedback. That's all the time, 00:18:55.193 --> 00:18:58.562 unfortunately, that we have for today. Brian, thank you so much for joining. 00:18:59.142 --> 00:19:00.582 Yeah, of course. Thanks so much. 00:19:01.389 --> 00:19:04.383 And thank you to our listeners for tuning in to another episode of The Market 00:19:04.383 --> 00:19:06.596 Edge. I'm Diana Olaire. See you next time.