Dodge: Future of Construction ‘Bright’ Despite ‘Elements of a Recession’March 2nd, 2023 by Travis Rains
In November of last year, analysts at Dodge Construction Network predicted that the United States would “narrowly avoid recession,” alongside a slowdown in economic growth. While the firm holds true to that prediction in its new 2022 year-end report, analysts now say that those in the construction sector “can expect to feel elements of a recession” as 2023 progresses.
According to chief economist Richard Branch, U.S. construction starts may remain unchanged in 2023 at $1.08 trillion, even with slowing economic growth. Dodge previously predicted that economic growth would slow to 0.7% in 2023, bringing the economy “dangerously close” to a recession.
“Although the U.S economy is anticipated to avoid a technical recession, many areas of the construction sector can expect to feel elements of a recession,” Dodge writes in its year-end report.
While analysts previously told [DWM] there’s “little hope” that lower mortgage rates (such as those experienced in 2021) will return in 2023, spurring the single-family market, multi-family starts could be poised for another big year.
“As prices lowered demand for single-family starts in 2022, the demand for multifamily buildings rose significantly,” Dodge writes. “As a result, multifamily starts have exceeded expectations — activity has been strongest in urban areas after two years of pandemic-related declines. Due to these factors, multifamily starts have reached the highest levels recorded since the mid-1980s.”
Dodge also continues to anticipate increased lead times and costs with respect to material prices and labor. However, it says many companies are rethinking their workforce strategies and focusing on innovation in an attempt to “navigate the challenging climate ahead.”
“Efforts to drive efficiency are joining priorities to transform the construction industry into a proactive and innovative sector focused not only on efficiency, safety and growth, but also sustainability,” Dodge writes. “Our research findings discovered construction owners as catalysts for change in both technology and sustainability.”
The good news is that according to recent data cited by Dodge, material price inflation is easing and could impact bid prices in 2023.
“Construction is at a pivotal moment surrounded with opportunities to innovate and reimagine its trajectory with new practices that impact the bottom line and contribute to positive societal changes,” Dodge writes. “Despite the clouds on the horizon, the future of construction remains bright.”