Spending on large U.S. commercial construction projects should rise slightly through the rest of 2024 as certain building materials become more affordable and contractors cut prices to replenish depleted project pipelines.

Construction spending is expected to rise 5.5% from last year to $2.13 trillion in 2024, according to the JLL 2024 Midyear Construction Update issued on Tuesday. JLL had earlier forecasted total construction spending to be flat for 2024 but revised the estimate upward based on its indicators for building materials and general contractors’ bidding patterns.

Prices for insulation, concrete, bricks, doors and windows are still rising but at a slower pace in 2024 compared to last year, according to JLL. The cost of metal building materials is falling with an estimated 2.5% decline in 2024 compared to last year.

Additionally, many general contractors have burned through project backlogs and are now seeking to refill those empty coffers, said Julie Hyson, executive director of portfolio clients, services and industries at JLL. That’s led to contractors slicing their asking prices.

“There’s a fire in the belly of contractors that wasn’t there one or two years ago,” Hyson told CoStar News. “Constructors are more mindful of the need to build backlogs.”

In terms of project types, much of the growth is coming from the construction of data centers, semiconductor manufacturing plants, hospitals and sustainability initiatives, JLL said. But the growth in those areas is offset by slowdowns in office construction and other property types.

Large projects, sometimes reaching multibillion-dollar contract awards, are fueling much of construction firms’ growth. That includes Fluor winning a contract during the second quarter to provide engineering, procurement and construction management services to Eli Lilly for its $9.3 billion manufacturing plant near Indianapolis, according to the Irving, Texas-based company.

The federal Infrastructure Investment and Jobs Act and other federal programs are also driving large construction projects. The U.S. Department of Transportation this month awarded a $1.5 billion grant to the states of Oregon and Washington to replace the Interstate 5 bridge spanning the Columbia River between Portland, Oregon, and Vancouver, Washington. Additionally, Amtrak awarded a $637 million construction contract to Skanska and a development partner to rehabilitate the East River Tunnel in New York City.

Developers also continue to hire contractors for small and medium-sized commercial projects. Meta last week hired Portland, Oregon-based contractor Fortis Construction to build an $800 million data center in Cheyenne, Wyoming. Henry Ford Health last month hired a team led by Omaha, Nebraska-based contractor Kiewit to design, build and operate a $235 million heating and cooling facility for the Henry Ford Hospital in Detroit.

Emcor Group, a Norwalk, Connecticut-based construction company, has seen an increase in work on cold storage warehouses, CEO Anthony Guzzi said during an April conference call.

Cold storage properties “are smaller in dollar awards but require actually higher skills to do them, especially some of the refrigerant work and fire safety,” Guzzi said. Guzzi did not identify clients nor locations for its cold storage projects.

Other developers are betting that the Fed will cut rates within the next 12 months, according to JLL.

Some developers “who were holding out for better interest rates have started to move on projects,” JLL said in the report.

Recent economic indicators add "somewhat to confidence” that the Federal Reserve’s higher interest rates are working to cut inflation, Federal Reserve Chairman Jerome Powell said on Monday without providing details about the timing of potential rate cuts.

The JLL report is based on construction spending data extracted from the U.S. Census Bureau’s monthly Value of Construction Put in Place survey and the Bureau of Labor Statistics’ producer price index for the construction industry.